Private Capital Solutions: Innovative Approaches for a Complex Environment

As the second half of 2024 gets underway, much has changed in terms of economic conditions, the rate environment, credit markets, and buyer and seller dynamics. While some uncertainty remains, the pillars of a significantly more robust M&A market appear to be solidifying.

At the same time, many private equity groups have contended with a relative lack of high-quality opportunities, gaps between buyer and seller valuation expectations, and the imperative to generate liquidity for investors amidst elongated hold periods.

In this complex environment, PEGs are increasingly interested in innovative approaches to generating liquidity, raising capital, and financing growth. A growing number are accomplishing these goals through a variety of private capital solutions, from GP-led secondary transactions, such as continuation vehicles, to portfolio company financings, including preferred equity.

Below, our senior professionals highlight several recent transactions that exemplify the burgeoning interest and momentum across private capital solutions.

Special Situations Investment Firm Closes Continuation Vehicle

As an example, Harris Williams served as exclusive financial advisor to a global credit investment firm on the formation of a continuation vehicle for a market-leading provider of mineral and engineered material products. The vehicle provided secondary liquidity to several existing client-managed funds and third-party minority shareholders. The transaction enabled the firm to grow its equity exposure and extend its investment duration to participate in the company’s next phase of growth.

Anchored by investment funds managed by Kline Hill Partners and LSV Advisors, the vehicle was oversubscribed and received strong interest from new investors, including Goldman Sachs Asset Management, Coller Capital, and Jasper Ridge Partners.

“We strove to provide a holistic solution for our client. This transaction ensures the firm can continue to steward a market-leading business,” says Andrew Gulotta, a managing director in our Private Capital Advisory Group. “The company’s role as a mission-critical, value-added supplier has driven consistent performance, with multiple levers in place to continue strong growth.”

Allied OMS Secures Financing

In another recent engagement, Harris Williams advised Allied OMS on its $116 million financing. Allied OMS is a doctor-led and sponsor-backed management services organization for oral and maxillofacial surgery practices.

The capital commitment is Allied OMS’ first outside financing to help fuel its growth and provide incremental liquidity to equity shareholders. The capital will allow Allied OMS to fund partnerships with future OMS practices, de novo and satellite office expansion, and the recruiting of renowned practitioners, while providing a dividend to key stakeholders.

"With this financing, Allied will be able to accelerate its growth through its acquisition strategy targeting like-minded oral surgery practices that want to join a best-in-class platform. We are excited about the company’s future,” says Gulotta.

PANOS Brands Acquires the Santa Barbara Smokehouse

Harris Williams also arranged the growth capital financing for PANOS Brands to close the acquisition of the Santa Barbara Smokehouse (SBS). PANOS is a provider of branded consumer foods, while the Santa Barbara Smokehouse is a leading producer of high-quality smoked salmon.

“The financing enables HKW and the management team to continue executing on its growth strategy for PANOS, providing significant flexibility to expand the company’s portfolio of brands,” says Richard Siegel, a managing director in our Private Capital Advisory Group. “This acquisition accelerates the company’s mission of providing premium, authentic, natural, organic, and specialty foods.”

Creative Alternatives for Liquidity

Within a stabilizing M&A environment, market participants remain highly selective and focused on company- and sector-specific dynamics. Meanwhile, buyers and sellers continue to calibrate on valuation, causing a greater need for alternatives to generate liquidity, raise capital, and finance growth. These approaches include a growing variety of private capital solutions, such as GP-led secondary transactions and portfolio company financings, among others.

To learn more about our range of private capital solutions and in-depth industry expertise, please contact our senior professionals.