While the vast majority of alternative asset managers remain owner-managed, in recent years a growing number of GPs have pursued IPOs, equity and debt solutions from external investors, and even outright sales. With such M&A activity in the private funds space initiated by a wide range of drivers – including generational shifts, liquidity requirements or the need for expansion capital – the complexities of executing deals to achieve optimal outcomes cannot be downplayed.
The increasing rise in the availability of liquidity for alternative asset managers is a marked shift from the position signalled by the High Court in 2014 in Re Charterhouse Capital Ltd. In this case the judge commented that private equity businesses are "among the most difficult types of businesses to sell", with IPOs "challenging" and sales to competitors "unlikely". He also said that, although not impossible, it was clear that it would be "extremely hard" to source third-party investment.
Fast forward eight years and we now see successful financial sponsors regularly able to attract investment at valuations that are highly attractive to their current owners, while last year also saw the completion of IPOs by alternative asset managers including Petershill Partners, Bridgepoint Group and Antin Infrastructure Partners.
Reasons for this change in the landscape are varied but reflect the fact that there is rapidly expanding investor appetite for GPs as an asset class; third party equity and / or debt financing is being sought to fund higher levels of GP commitments required by LPs; and those LPs are increasingly demanding multi-strategy, multi-jurisdictional investment managers that can offer a suite of products to increase their exposure to alternatives.