Greenpark merger: a solid solution?

Rumours had been circulating for a while, so when it emerged that London-based secondary investor Greenpark Capital had been taken over by StepStone Group, it didn’t come as a total surprise.

Unfortunately, the two firms chose not to elaborate on some of the question marks surrounding the deal. Both have since declined to comment, other than via a short statement on Greenpark’s website. “Greenpark Capital is delighted to announce that it has merged its private equity secondary activities into the business of global private equity firm StepStone Group,” it said simply, directing visitors to the latter’s website.

It is unclear how long the deal had been in the making; one source tells PEI it took approximately six months, while another suggests talks started about a year ago.

It is understood that Marleen Groen, who co-founded Greenpark with Joanna Jordan in 2000 after leaving Coller Capital, has become a special advisor at StepStone. However, she will not be directly running the Greenpark funds for StepStone, according to two sources.

This change of control for the funds would have required LP approval, which is one of the reasons why the deal has taken a while to complete, according to the source.

It is understood that four professionals, including Groen, have moved to StepStone from Greenpark, which had a total workforce of about 20 people, the source adds.

The merger comes after Greenpark closed its fourth fund on $500 million in the third quarter of last year, PEI reported in April.

Greenpark had originally targeted a much larger amount for the fund. But after spending more than two years marketing the product, and having held a number of rolling closes, the firm decided to bring fundraising to an end so it could focus on investing, a source said at the time.

“There’s a flight to quality and perceived safety. No one gets fired for backing the big guys like Coller who do $1 billion deals,” the source added.

Greenpark’s problems didn’t end there. Several staff members have left the firm in recent months, including former investment directors Eric Pathé and Philippe Munch. According to Munch’s Linkedin page, he left Greenpark in April and is now a partner at Proval Invest.

This eventually resulted in Greenpark losing a mandate from the International Finance Corporation, (IFC), the World Bank’s investment arm, according to the earlier cited source. In 2011, Greenpark had revealed plans to raise a $500 million emerging market secondaries vehicle, which would be anchored by a $100 million commitment from the IFC. The plan was that the fund would initially target more mature markets in Asia, and then expand into Latin America and Africa over time.

“Emerging markets secondaries is a massive growth area,” Daniel Green told PEI in October 2012. “Although the volume doesn’t come close to what you see in Europe or the US, we believe there is comfortably $2-3 billion of deal flow there each year. Equally importantly, it’s a less competitive marketplace than in the established markets.” Yet while the IFC clearly believed in this strategy, Greenpark apparently failed to get much traction with other LPs.

In light of all this, Greenpark’s prospects were clearly not as bright as they used to be – which may have prompted the idea of teaming up with a group like StepStone, which appears to be keen to expand its European footprint.
In November 2011, StepStone ramped up its European activities by acquiring Parish Capital Advisors’ funds management business; it subsequently appointed Parish managing partner David Jeffrey to head its European operations and business strategy.

This was “a very good thing for us”, StepStone’s chief executive officer Monte Brem told PEI at the time. “Both in the European part of our business and also in small market, niche focused funds, which is something we’ve always had an interest in.”

It is unclear what the takeover will mean for StepStone’s assets under management, which are approximately $10 billion, according to its website. In April, StepStone reached its $450 million hard-cap for its StepStone Secondary Opportunities Fund II, illustrating LPs’ appetite for the firm’s secondary strategy.

But for investors in the Greenpark funds, the takeover is a “fantastic outcome”, according to one of the sources cited earlier. “Rather than the uncertainty which may have surrounded Greenpark, [this deal] brings stability [for LPs].”