Why private equity firms sell stakes to other firms

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Signage is displayed outside the Blackstone Group Inc. headquarters in New York, U.S., on Saturday, July 13, 2019. The Blackstone Group Inc. is scheduled to release earnings figures on July 18. Photographer: Mark Abramson/Bloomberg

BC Partners has joined the growing group of private equity firms selling a minority stake to another PE firm to fuel expansion plans. Earlier in August, the firm, which is headquartered in London with additional offices in New York, Paris and Hamburg, announced it had sold an interest in the firm to New York’s Blackstone Alternative Asset Management for undisclosed terms.

The investment was led by BAAM’s Strategic Capital Group, which has been snatching up interests in other PE firms recently. Over the last couple of years, the group acquired similar stakes in Kohlberg & Co., Leonard Green & Partners and New Mountain Capital.

“BC Partners has a three-decade track record investing across sectors and geographies,” said Scott Soussa, head of BAAM’s Strategic Capital Group. “This, combined with the strength of their people and processes, has allowed the firm to earn the trust of a diverse set of LPs around the world. We look forward to helping enable their continued growth in private equity, as well as their further expansion into newer areas like real estate and private credit.”

For BC Partners, the arrangement provides capital to grow. “This investment is a testament to the growth and institutionalization of our business, and will enable us to take the firm to the next level for the benefit of our investors,” said Raymond Svider, partner and chairman of BC Partners. “We look forward to leveraging Blackstone’s best-in-class resources and exceptional talent, as we look to expand and strengthen our platform across our three key verticals.”

Established in 1986, BC Partners has more than €22 billion ($24.65 billion) of assets under management in private equity, private credit and real estate. Since inception, the firm has completed 111 private equity investments in companies with a total enterprise value of €135 billion ($151.2 billion) and is currently investing its tenth private equity fund.

BC Partners plans reportedly to raise a new multibillion-pound flagship fund next year. The international firm is seeking to diversity into new asset classes. To that end, BC Partners recently launched a real estate business and a private credit platform.

PE firms increasingly are selling minority stakes to fund expansion plans. Some recent examples include: In 2019, Dyal Capital Partners acquired a minority stake in HGGC; Siris Capital Group received a minority investment from Wafra and Landmark Partners; and in 2018, Dyal purchased minority stakes in Clearlake Capital Partners and Vector Capital.

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