Goldman Sachs leads Novacap continuation fund deal

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The Wire

Dec. 17, 2021

Goldman Sachs leads Novacap continuation fund deal

Happy Friday!

What’s shaking today?

Growth: Here’s another continuation fund deal, a type of structure that has been dominating the market and helping drive secondaries volume to likely record levels this year.

Goldman Sachs led a single-asset secondaries process in The Master Group, an HVAC/R products distributor, backed by Novacap Industries. The deal, which moved Master Group out of Novacap’s third fund, raised about C$1.1 billion.

Other investors in the deal included Fonds de Solidarité FTQ, Fondaction, Portfolio Advisors, Lexington Partners, Blackstone Strategic Partners, Whitehorse Liquidity Partners and iA Financial Group, according to a statement. Credit Suisse worked as secondaries adviser on the deal.

The deal comes after Master’s acquisition of Value-Added HVAC Distributors and its three subsidiaries, which allowed the company to expand into the U.S. market. Read more here on PE Hub.

There is an expectation that some of the large concentrated asset deals on the market will take longer to complete, or perhaps some will even, *gasp*, linger on without getting done. The issue is the limited universe of buyers in the secondary market. While tons of capital has been raised for secondary deals, dry powder doesn’t come close to being able to handle all the inventory.

Jefferies estimated near-term capital available for deployment, as of June, at around $231 billion (which has surely been whittled down through deal activity in the second half). However, buyers’ attention turned toward greater diversification after investing in more concentrated deals earlier in the year. This has driven activity around traditional LP portfolio sales.

“Some agents have been telling GPs to actually hold off on launching processes now, because there’s been a lot done, and some secondaries funds are sort of full-out on their 2021 allocations and they need to get back into the market and fundraise and put some distance between deals they’ve done,” said a secondaries professional.

“I think we’ll see a bit of a slowdown into Q1 … there’s some risk if you’re launching a process now,” the professional said.

That's it for me! Have a great weekend. Hit me up with tips n' gossip, feedback or book recommendations at cwitkowsky@buyoutsinsider.com or over on LinkedIn.

Read the full wire commentary on PE Hub ...

Also of note (may require subscriptions)

"Private debt has been coming under closer scrutiny in numerous respects. The methodology used to value investments is likely to be the next preoccupation for investors." (Andy Thomson's latest column in Private Debt Investor)

Alternative asset management firm BC Partners' credit arm, BCP Credit, has closed its second special opportunities fund at $1.2 billion. (Private Debt Investor)

"TPG, one of the world's largest privately held buyout firms, is going public in a long-awaited move that punctuates a flurry of IPOs across the industry as dealmakers capitalise on soaring valuations and raise growth capital." (Financial Times)