Lexington vs Ardian: clash of the titans

The latest in a series of chunky, high-profile win for Lexington Partners in the past six months was a strip sale involving Warburg Pincus’s 2012 flagship vehicle in mid-October. 

Lexington Partners, which is deploying its 2014-vintage, $10.1 billion Lexington Capital Partners VIII, was the majority buyer alongside Goldman Sachs Asset Management and a group of other buyers in a strip sale involving Warburg Pincus’s 2012 flagship vehicle, as the Wall Street Journal reported.

Sources told sister publication Secondaries Investor a roughly $1.2 billion slice of Asian assets from the fund, made up of stakes in 29 Asian companies, have been moved into a new vehicle named Warburg Pincus XI (Asia). The vehicle’s terms are different to those of the original fund and we understand at least one of these is quite surprising.

Leverage wasn’t used in the deal, either in the form of third-party acquisition financing or deferred payments, and while Lexington was the majority buyer, a mix of smaller secondaries funds, pension funds and other investors also participated in the transaction.

The Warburg deal is the latest in a run of chunky, high-profile wins for Lexington in the past six months as it deploys its 2014-vintage, $10.1 billion Lexington Capital Partners VIII.

Over the summer it emerged the firm was picking up the private equity portion of a roughly $2 billion private assets portfolio that Harvard Management Company had brought to market in the first half. More recently it inked the $1 billion stapled deal that helped BC Partners move toward the final close on its 10th flagship fund, as we reported in August.

It is not clear whether this represents an increase in deployment pace for the firm, which declined to comment for this piece, or business as usual, albeit in headline-grabbing deals.

What we do know is there is an additional incentive for the firm to crank up its deployment rate. With Lexington’s Fund VIII now between 60 percent and 80 deployed, according to sources, it is – or at least will be very soon – in marketing mode.

At the top of the secondaries food chain, Lexington competes with a handful of giants for LP capital, and one giant in particular: Ardian. It wouldn’t be surprising if the Paris-headquartered firm launched ASF VIII in the next 18 months seeking at least $10.8 billion – the size of its latest vehicle – and Lexington would be well advised to get on the fundraising trail before Ardian comes back to market.

The two biggest secondaries firms seeking capital from LPs at the same time would make fundraising nothing short of “awkward”, one source noted.

The fundraising market continues to be heated and no one knows how long this will last: a point surely not lost on the firms in question.