GS Goldman Sachs Group Inc

By Laura Kreutzer 

Thomas H. Lee Partners has bought itself more time to manage an investment in wealth-advisory firm Hightower Advisors LLC through a secondary transaction with investors that include Goldman Sachs Group Inc.

The size of the deal ranges between $700 million and $800 million, according to a person familiar with the transaction who did not provide any additional financial details.

The firm has recapitalized Chicago-based Hightower partly with new capital from secondary specialist Coller Capital as well as the secondary investment units of Neuberger Berman Group and Goldman Sachs. THL, as the Boston firm is known, will remain Hightower's lead investor and continue to manage the wealth adviser, according to a press release.

Secondary investments involving a single company or asset represent a small but growing part of the market for second-hand private-equity stakes. In such deals a private-equity owner often refinances a single asset using a new vehicle that typically provides it with a fresh five- to seven-year investment term, bringing in new capital from secondary buyers. The structures let firms hold onto assets for longer periods than they might otherwise be able to had the assets remained in the funds that originally backed them.

Shea Goggin, a managing director at investment bank Houlihan Lokey Inc., which advises firms on such deals, said there are several other single-asset deals in the market that firms are pitching to investors.

"We're seeing opportunities right, left and center," Mr. Goggin said. "Whereas before the strategic alternatives for sellers would be an IPO or straight sale, now this has become a more prevalent and accepted option."

For its part, THL initially invested in Hightower in 2018 and since then has steadily expanded the company. This year alone, Hightower announced eight add-on acquisitions through last month, on top of four such deals last year, according to the release. The wealth adviser with offices in 33 states had $61.6 billion in assets under management at the end of September, and $81.4 billion in assets under administration.

The person familiar with the deal added that investors were able to see how the company performed during the Covid-19 pandemic, which boosted confidence that it would continue to perform well.

Overall secondary investment activity, including single-asset transactions, is rebounding in the fourth quarter after uncertainty caused by the coronavirus pandemic dramatically slowed deal activity in the first half of the year. Deal volume declined by more than half to $18 billion during the first half of 2020, compared with the same period last year, according to data from intermediary Greenhill & Co.

"Now that you can see who has weathered the storm, the secondary market is able to re-engage and price with more certainty," said Justin Resnick, vice president on the secondary team at Houlihan Lokey. "But [buyers] will be looking for deals with assets that have proven their ability to perform through Covid and that still have upside."

Write to Laura Kreutzer at laura.kreutzer@wsj.com

(END) Dow Jones Newswires

December 03, 2020 18:55 ET (23:55 GMT)

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