AlpInvest-Led Group Seals $1.2 Billion Secondary Deal with Tom Lee Firm
Group also pledged about $300 million to a new fund Lee Equity Partners is trying to raise
The group, which also includes the Canada Pension Plan Investment Board, HarbourVest Partners, Pantheon among others, purchased investor stakes in the firm’s debut fund, the $1.1 billion Lee Equity Partners Fund, in a roughly $900 million secondary deal, four of the people said.
As part of the transaction, the consortium also pledged approximately $300 million to Lee Equity Partners Fund II, a new fund the firm is trying to raise.
This deal, known as a stapled secondary transaction, provided existing investors with an early way out of the older fund and allowed the firm to raise capital for its successor fund.
AlpInvest was the largest player in the deal, news of which was previously reported by trade publication Buyouts Insider. AlpInvest put in about 60% of the capital for the total transaction, one person said. Park Hill Group advised Lee Equity on the deal.
Fund I had roughly 10 companies remaining in its portfolio, which were shifted into a new pool called the Lee Equity Realization Fund. Investors who chose not to sell have rolled over their stakes into the new vehicle and will invest in Realization Fund on the same terms they had for Fund I.
Lee Equity was launched in 2006 by Mr. Lee after he departed from the namesake Boston-based Thomas H. Lee Partners LP, which was founded in 1974. Mr. Lee is seen as a pioneer in the leveraged-buyout business.
Lee Equity’s first fund struggled to deploy all of its capital in time. At the end of 2013, the Fund I received an 18-month extension to its commitment period, which is the time during which the firm can call on investors to release capital for new deals, one person said. That extension ended on June 30, 2015.
Lee Equity’s investments through Fund I include Skopos Financial Group, a Dallas-based lender which specializes in loans to people with weak credit scores, and Deb Shops, a retailer of plus-size clothing for women that went into liquidation in 2015.
Lee Equity had been considering raising a second fund for at least 2½ years and Dow Jones reported in 2013 that he was weighing a stapled-secondary structure.
Lee Equity completed two exits from Fund I in 2015, along with four new investments and seven companies acquired as add-on acquisitions. In December, the firm sold PDR Network, an information provider for health-care and drug companies, to Genstar Capital. In October, it sold a controlling stake in wealth manager Edelman Financial Group to Hellman & Friedman in a deal that valued the company at more than $800 million.