Side Letter: HarbourVest’s big haul, deal DD in the pandemic, Vista’s Robert Smith

In a sign that investors are expecting big things for the secondaries market, HarbourVest has just raised a very large fund for the strategy. Plus: Vista's Robert Smith's tax affairs, Goldman results and due diligence in the pandemic era. Here's today's brief, for our valued subscribers only.

They said it

“When you take away the habits that everybody’s developed over the years – the dinners, the social interaction, leveraging intuition in making a selection decision – this forces everybody to go back to basics and build the foundation around scorecard competencies, experience, assessment, references and psychometrics in some cases.

Frankly, I hope for the industry that some of those habits endure past covid.”

A global head of talent at a buyout firm shares the positive aspect of recruiting during the pandemic era at the PEI Operating Partners Forum Virtual Experience 2020 on Wednesday.

They did the math

Worth hitting the road? Would you be willing to travel amid covid-related restrictions to due diligence a potential asset, even if it means quarantining? New research from proSapient, shared exclusively with Private Equity International, shows 70 percent of industry execs are willing to do just that (check out the full presentation, online now). Despite this – and the fact that, pre-pandemic, 56 percent considered in-person due diligence to be “very important” – more than 80 percent of respondents are comfortable completing an acquisition via virtual due diligence. With new lockdown restrictions coming back into force across several major markets, that’s probably just as well.

Just happened


HarbourVest Partners has become the latest firm to raise a multibillion-dollar fund this year, hauling in a whopping $8.1 billion for its latest flagship secondaries vehicle, Dover X, the firm said yesterday: details on sister title Secondaries Investor (subscription required). Two points of note:

  • Dover X is almost 70 percent larger than the firm’s 2015-vintage predecessor, giving it a lot more firepower at a time when many expect the secondaries market to take off like a rocket.
  • The raise brings total secondaries fundraising this year to at least $61.9 billion. For context, the overall private equity market collected around $349 billion through September this year across all strategies.

Earnings watch: Goldman

Goldman Sachs’ $16 billion private equity portfolio generated gains of about $640 million in the third quarter, down 26 percent from Q3 last year, according to its Q3 earnings statement. More than $400 million of that figure was driven mainly by events including “fundraising, capital markets activities and outright sales and IPOs”, while the remaining amount came from operating revenues of its portfolio companies, said CFO Stephen Scherr on the firm’s earnings call on Wednesday. On the fundraising front, the firm is on track to reach $14 billion of total commitments for its special situations fund West Street Strategic Solutions I, and has launched new funds in PE, growth equity and real estate, said CEO David Solomon.


The flight to familiarity

Fundraising in the first nine months of 2020 remained strong and matched prior-year periods, although the number of funds closed thus far is down 50 percent versus full-year 2019, reflecting the impact of the coronavirus pandemic on LPs’ preference for managers they know and have already backed before. Read more here.

Smith to settle, says report

Bloomberg is reporting that Vista Equity Partners founder Robert Smith will pay $140 million and acknowledge wrongdoing to end a tax investigation (see Side Letter 24 August 2020), citing people familiar with the matter. Smith’s spokesperson declined to comment. Details of the settlement may be revealed today, one of the sources is reported as saying.

Today’s letter was prepared by Toby Mitchenall with Isobel MarkhamAdam LeRod James and Carmela Mendoza.

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