Tikehau closes GP-led secondaries process with Five Arrows

Denise Ko Genovese
20 February 2020

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France-headquartered asset manager Tikehau has fully wrapped up a secondaries process that began last summer, according to three sources familiar with the situation.

As part of the deal, six assets on Tikehau's balance sheet were put out to tender to new buyers to be placed in a new vehicle, on the condition that the investors would also commit to the GP's new fund, Tikehau Growth Equity II (TGE II).

During the tender process, Five Arrows committed as anchor investor from its recently closed Five Arrows Secondary Opportunities V (Faso V) vehicle, all three sources said.

The Five Arrows investment was on a 2:1 ratio, meaning that for every €2 it committed to the secondary fund, there was a prerequisite to commit €1 to the new fund. The ratio was subsequently stretched through the syndication phase, said the first source familiar.

The fund was oversubscribed and, in total, nine institutional investors took part in the transaction.

"The motivation behind the [secondaries] deal was to attract big names to be investors in what is essentially Tikehau's first private equity fund," said the first source familiar, adding that although the GP had raised other funds before, such as debt and special situations, TGE II was the first pure private equity vehicle, as the previous investments had been carried out on a deal-by-deal basis from the balance sheet.

The assets under management (AUM) of the secondary fund holding the six assets reached €240m as of December 2019, and Tikehau holds a 15% stake in this fund through its balance sheet capital. This vehicle is separate to TGE II.

TGE II was launched in 2018 and held a first close in July 2018 on €200m. The vehicle will back 10-12 small and medium-sized businesses across western Europe with EBITDA of €5-50m, targeting minority equity investments in the €25-100m range, according to Unquote Data. As of December 2019, TGE II had AUM of €370m.

Five Arrows held a final close for Faso V in January this year, surpassing its €700m target following a fund launch in Q1 2019, according to Unquote Data.

Flow Advisors – led by Nicolas Lanel, the former head of European secondaries at Evercore – advised on the deal, and Jones Day acted as legal counsel.

Tikehau, Five Arrows and Flow Advisors all declined to comment.