GP-Leds

Fund restructurings have entered the mainstream, which means GPs need a better understanding of the legal and compliance risks involved in the strategy, write Gibson Dunn lawyers Candice Choh and Shawn Domzalski.

The New York firm has restructured its third fund into a $1.5bn vehicle, offering the same terms to LPs that rolled over their interests. Recent acquisitions include children's entertainment company Bendon.

The Seattle-based firm noted in its Private Equity Outlook that a general increase in primary private equity investments at high valuations, followed by a market correction, could provide a favourable future entry point.

The fund of funds giant has signed a deal to purchase a stake in Portobello Capital II through a new fund structure.

Despite the growing popularity of GP-led restructurings, they still represent only about 10 percent of the private equity secondaries market, Luca Salvato, investment partner at Coller Capital, said at a conference this week.

Fund restructurings have become a common occurrence in the secondaries market. Jeff Hammer and Paul Sanabria, managing directors and co-heads of the illiquid financial assets practice at Houlihan Lokey, explain what makes a GP a good candidate for a fund restructuring and how to ensure that LPs are getting the best possible deal.

Increased competition is prompting secondaries firms to find new ways to maintain returns, including using leverage and participating in restructurings, according to Sunaina Sinha from Cebile Capital.

Almost 80% of LPs have taken part in one or more PE fund restructurings since the global financial crisis.

The New York-based firm surpassed its $8bn target and closed the market’s largest secondaries fund to date.