PAI completes GP-led secondaries deal for Fund V

The two assets – Froneri and Marcolin – were previously held in PAI Fund V, according to two sources familiar with the situation. The rationale is that the new fund can provide continued, long-term investment to both assets.

The new vehicle is called PAI Strategic Partnerships and is roughly €2bn in size; it has a five-year term with the possibility of two, one-year extensions. Lead investors include Alpinvest Partners, Goldman Sachs Asset Management and Harbourvest Partners.

Evercore advised on the secondaries transaction.

With Fund V in its 12th year and with limited uncalled capital available, a source said it was clear that the companies could benefit from a new pool of capital, especially given the consensus that there are more opportunities available.

One such opportunity is the recent announcement of Froneri's acquisition of Nestlé's US ice-cream business for $4bn, which will complete next year and be part of the new fund's portfolio.

Froneri and Marcolin are thought to sit well together since they are both partnerships with Nestlé and LVMH respectively.

The GP acquired Italian eyewear manufacturer Marcolin from Fund V in October 2012 for €207m. It then bought R&R Ice-Cream in 2013 for €850m and subsequently merged the company with several Nestlé ice cream and frozen foods businesses in 2016, rebranding as Froneri.

PAI Fund V originally closed on €5.4bn in 2008, but internal controversy sparked by the arrival of Lionel Zinsou resulted in the departure of key partners Bertrand Meunier and Dominique Mégret. This triggered a key-man clause on the 2008 fund, which was ultimately halved to €2.7bn. In the end, extra concessions on fees and corporate governance swayed two-thirds of investors to support the restructuring and to restart the shrunken fund.

The GP rebounded quickly afterwards with a sustained divestment effort beginning in 2011. It then raised €3.3bn for PAI Fund VI in 2015 and €5bn for its seventh fund in 2018.

The Fund V restructuring marks the second time PAI has turned to the secondaries market in as many years. Perstorp, a Swedish chemicals business in the portfolio of PAI's fourth fund, was transferred to a new fund managed by PAI – with Landmark Partners as lead investor – in 2018.

Both GP-led secondaries and single-asset continuation vehicles have become a key fixture of the secondaries market, as was noted by participants in Unquote's recent end-of-year roundtable – for some secondaries players, 50% or more of overall deployment strategy is concentrated in single-asset or asset portfolio strategies as opposed to traditional LP-led secondaries.

PAI declined to comment when contacted by Unquote.

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