European buyout firm Motion Equity Partners has been given a new lifeline by HarbourVest Partners in a major fund restructuring deal.
HarbourVest has provided the firm with capital for two to three deals and approximately four years to make money out of its portfolio, according to two sources familiar with the matter. It is understood that limited partners in Motion’s Fund II, a €1.25 billion vehicle raised in 2005, had the option of either selling their stakes or staying in the fund for the next four years.
Approximately half of Motion’s LPs sold their stakes, the source said. It is understood there are about 20 investors left in the fund. It’s unclear how much HarbourVest paid for the LP stakes.
It is understood Rede Partners advised on the transaction. Both Rede Partners and HarbourVest declined to comment, while Motion didn’t respond to a request for comment at press time.
The LP terms for the remaining investors stay the same, according to two sources. This means LPs will continue to pay management fees, but they are “quite low”, according to the sources, as these management’s fees had already been reduced in 2011 after Motion went through a restructuring.
Prior to the HarbourVest deal, Motion was in talks with the Canada Pension Plan Investment Board after the pension fund approached them for a possible restructuring. It is understood CPPIB wanted to restructure the fund and force LPs into a new vehicle. LPs didn’t agree to this, so that deal failed.
The transaction marks the end of a long period of uncertainty for Motion. In April 2012, the firm, formerly known as Cognetas, rebranded itself as Motion Equity Partners in a bid to shake off negative publicity following the departure of the firm’s managing partner and founder, Nigel McConnell. He left Cognetas in 2011 due to “strategic differences”, PEI reported earlier.
Subsequently, Motion closed its office in Frankfurt, reduced its office in London and shifted its investment focus to French and Italian markets.
The firm’s second vehicle is fully deployed and has only managed to exit one business from this portfolio. It sold Ixetic, a producer of high-performance pumps for the automotive sector in October 2012, netting the firm a 2.2x return.
With a lack of returns, Motion was not in a position to raise a new fund. While the fund is still in wind-down mode, the backing from HarbourVest has given Motion some extra time to realise the remaining assets, without being perceived as distressed sellers. In addition, the Motion team has been re-incentivised. It is understood there was a carry reset on the fund as part of the restructuring back in 2011. There is a bit of carry for the team and HarbourVest will top this up slightly.
The Motion deal represents one of the first major European restructuring of an end-of-life fund. Two well-known restructurings took place in the US last year involving Willis Stein & Company and Behrman Partners. In the case of the Willis Stein fund, a majority of existing LPs were bought out with financing provided by Landmark Partners, Vision Capital and Pinebridge Investments, as well as Willis Stein management.
With Behrman Capital’s fund, the five remaining portfolio companies in the firm’s third fund, a $1.2 billion 2000-vintage, were rolled into a new, $1 billion vehicle funded by CPPIB, Goldman Sachs and other investors.