A Private Equity Fund Bought Your Business – What Happens When They Don’t Want to Sell It?

About the Episode

When a private equity firm buys your business, what happens if they don’t want to sell it before their fund ends? This episode dives into continuation vehicles, a tool firms can use to extend their ownership of your company. We’ll explore how firms might use this vehicle and how it could affect your post-sale life and earnout.

It’s very possible that you’ll be in bed with that private equity fund for much longer than you might have expected.

Jeff Bollerman

What You’ll Learn

• What is a continuation vehicle for PE firms? If a private equity firm wants to hold on to your business for longer than its fund’s life cycle, a continuation vehicle allows it to effectively sell the company to itself.
• Why do PE Firms use continuation vehicles? The most likely reason a private equity firm would use this vehicle is to prevent selling a “trophy asset.” When a company outperforms expectations and needs more capital, the firm may move it into a new fund to continue its growth and reap a higher return on investment.
• Will this mean more money for you? If you, as the founder, rolled over some equity in the original deal and are still involved in the business, you will be expected to roll that investment into the continuation vehicle. This process is a liquidity event for the firm’s investors, not for you.
• How common are continuation vehicles? As the secondary market matures, continuation vehicles are here to stay. This will reduce the risk of illiquidity for private equity investors and extend the average holding period for private companies.

Topics Covered

Want More? Related Resources:

• M&A Guide | The 4 Types of Buyers of Businesses
• What Returns Do Private Equity Firms Really Generate?
• Deal Killers and Deal Makers: A Private Equity Perspective

Meet Our Guest

Jeff Bollerman

Managing Director in the Private Capital Advisory Group | New York, NY

Jeff Bollerman is a Managing Director in the Private Capital Advisory group. Prior to joining Raymond James, he was a founding member of Houlihan Lokey’s Illiquid Financial Assets group, where he advised institutional investors seeking liquidity solutions for non-exchange-traded assets that are difficult to value and price. Mr. Bollerman has advised the sponsors of private capital vehicles or their investors, financial institutions, government agencies, creditors, or other owners with portfolio disposition plans, pricing intelligence, structuring insight, liquidity alternatives and transaction execution.

LinkedIn: https://www.linkedin.com/in/jeffrey-bollerman-784a932/