The traditional methods of exiting private equity investments (i.e. IPO) are not working for many investments bought in 2006 to 2008. These companies were acquired using unrealistic projections or at high prices and have no buyers. They are perhaps the last holdings of a fund. According to Andrew Hawkins, CEO and Founder of NewGlobe Capital Partners, there are $75 billion worth of companies in this category. NewGlobe and two other firms, Vanterra and Hamilton Lane, will buy these assets, allowing the private equity fund to close and return cash to its investors. This allows the fund manager to start up a new fund. What does NewGlobe receive? Oversight of the new fund and a chance to invest in the new fund.
There are two other exits that are available: (master limited partnerships (MLPs)) and employee stock option plans (ESOPs). The fund would sell the company to the MLP. Then the MLP would offer an IPO. This would be a good resolution for a company that is still too small to be publicly traded or have a low valuation. The ESOP route would sell the asset to the employees and management of the firm.
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