The trend of longer lasting funds has also accelerated interest in add-on deals because fund manager agreements with investors usually prohibit buyout deals after a set period of a fund’s life. An exemption is often included for a small number of additional deals, said Whitney Lutgen, a lawyer at MJ Hudson in London.
Steve Pierson, managing partner at middle-market private equity firm Lovell Minnick Partners, said small companies were more open to deals this year because the coronavirus crisis stressed their balance sheets and tested their business plans. His firm closed about 22 add-on transactions and is seeking to do more.
“Think about March and April, everyone was pretty nervous about the state of the world,” Pierson said. “If you don’t know what’s going to happen over the coming months, it’s logical to turn to an existing relationship.”
This article was provided by Bloomberg News.