Colonnade has provided the following services to its GP and investor clients:
- Manage and monetize legacy direct private equity portfolios
- Augment GP’s capabilities
- Assume a seat on the Investment Committee to bring added expertise to new capital commitments
- Assume all GP responsibilities
- Identify and execute new investments
TYPES OF TRANSACTIONS
End of Life Funds
End of life funds have become a significant part of many investors portfolios. Today, 495 buyout funds raised prior to 2006 hold $132 billion of assets. With exits hovering around 500 per year, $1 trillion of dry powder available to be invested and 750 additional funds raised in 2006-2008 just past their investment period, we are experiencing a secular change of fund extensions. Frustration builds on both sides leading to the pejorative term, zombie funds.
It doesn’t have to be that way. Changes need to be embraced to to accommodate an inevitably maturing industry. Colonnade introduces, at either the GP’s or LP’s request, asset management tailored specifically to legacy assets and designed to maintain and maximize value to successfully end, but not extend, the time needed for a successful liquidity event.
The most critical subset of the end of life funds are the 351 pre 2006 funds holding $132 billion of assets and not raised new capital since 2008. Critics worry managers are relying on the dwindling fees of an aging fund to maintain operations.
Recent evolution of fund restructurings offer possible solutions – but many obstacles stand in the way of successful transactions including legacy perceptions about changing fund terms. Colonnade instead focuses on two components of value creation – adopting a culture of liquidity into the active and daily management of the assets and capturing the idle origination capacity of fund managers in their proven areas of expertise. With very different starting positions of the parties, introducing a third party like Colonnade brings renewed confidence to both sides, bridging the gap, and making transactions more likely to occur.
New Direct Investments
Most funds will not get restructured. Current investment opportunities are fleeting. Colonnade finds ways to capture those opportunities for investor’s benefit.
Colonnade provides investors with the confidence they need to provide one off financing to a GP in its proven area of expertise even when its prior fund did not perform as expected.
- Critique original investment thesis
- Evaluate execution to date
- Determine current relevancy or need to modify
- Analyze financial position, performance, competitive position, quality of management and overall flexibility for improved performance and/or executing a transaction
- Create multi-year operating plan, complete with forecasts, funding needs, etc.
- Colonnade is often working with limited time horizon to apply traditional private ownership value creation tools due to already extended holding periods. Investment continues but with a focus on projects that can demonstrate value to suitors before being fully executed
- Create a culture of liquidity
- Estimate realistic exit time frame
- Manage operations to maximize value as of that date
Prepare company for a seamless and successful sale process
- If already extended, determine why ownership has continued
- Evaluate prior attempts to exit
- Evaluate and track all potential suitors
- Consider non-traditional exit strategies
- Sales by division
- Review, evaluate and resolve or ring fence all valuation variables prior to beginning a sale process