Oct. 12, 2023 6:00 am ET|WSJ PRO
BV Investment Partners has raised a fund that will let it maintain control of a strong-performing software company as a wave of so-called continuation vehicles washes through the private-equity market.
The Boston buyout shop, which invests in technology businesses, said it gave investors in its nearly 10-year-old eighth fund the option to sell their holdings in Right Networks or roll into the new vehicle. The firm’s $487 million BVIP Fund VIII acquired the Hudson, N.H.-based tax and accounting software provider in 2016.
As the commingled investment vehicle neared the end of its predetermined term, BV saw a “significant long-term growth opportunity” in keeping Right Networks under its roof as it liquidated the fund, said Vikrant Raina, the firm’s chief executive and managing partner.
The cloud-based programs provided by Right Networks are now used by more than 10,000 accounting firms and 60,000 small and midsize businesses, according to BV. The business had 25,000 customers when BV acquired it, according to a statement released at the time.
The continuation fund’s investment priced the business at a premium to its value on the Fund VIII ledger, according to people with knowledge of the matter. Raina declined to comment on the price.
While data from investment bank Jefferies Financial Group shows the volume of continuation fund deals, a form of secondary-market transaction, falling 25% to $18 billion in the first half of this year from the year-ago period, a large number of such deals have hit the market in the past two months.
Continuation vehicles provide private-equity managers with a way to hold on to their best assets or find more time and capital for businesses that they can’t sell or publicly list, according to several buyers and advisers on such deals.
Continuation fund investors Lexington Partners, StepStone Group, Kline Hill Partners and Apogem Capital put up less than $250 million to buy Right Networks from the BV fund and finance its growth plans, Raina said.
Secondaries specialist Lexington, owned by Franklin Templeton, underwrote the deal and wrote the largest check. Investment bank Guggenheim Securities advised on the transaction.
The total size of the new vehicle, including investors that rolled in their stakes from Fund VIII, wasn’t disclosed.
In a departure from the typical model for such deals, the continuation vehicle doesn’t charge a management fee to investors that rolled over from Fund VIII, Raina said. The manager also maintains the same profit share percentage as outlined in the terms and conditions of its Fund VIII.
The firm has invested around $5 billion since its founding in 1983. Its 11th and most recent fund rounded up $1.75 billion when it wrapped up fundraising in September, its upper limit.
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