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Matt Goldstein Discusses the Opportunities and Challenges of PE Continuation Fund Transactions With Mergermarket

April 22, 2024

Corporate partner Matt Goldstein spoke with Mergermarket about the rapid ascent of general partner-led secondaries in recent years, as well as the intensification of liquidity needs, which has prompted concerns over where there is enough capital to cover all the deals that private equity firms are looking to launch. In “PE Continuation Funds: GP Appetite for Secondaries Faces Supply-Demand Imbalance,” published on April 22, Matt discusses the benefits of launching a continuation fund, noting that if a manager raises a continuation fund, “there are no pre-payments, [and] no penalties for change of control with respect to the debt of the portfolio company,” he notes. However, if the manager sells the portfolio company via a traditional M&A transaction, “the debt may mature early, [and] there could be substantial fees and pre-payments and transaction costs.”

Moreover, in a typical sale of a portfolio company, “the buyer would need to raise new debt and ask debtholders to roll” over their debt, he notes. “These contingencies are eliminated when doing a continuation fund transaction when you just need approval from LPs in a private setting, increasing the certainty of transaction execution.”

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