London-based G Square Healthcare Private Equity has raised a €500 million (about $553 million) continuation fund to extend its control of portfolio investments from two legacy vehicles.
The new vehicle marks one of the latest examples of the growth of continuation funds, a rapidly growing portfolio management tool that allows GPs to hold their investments for longer when a sale is deemed premature.
PE firms set up continuation funds to extend ownership of existing assets as they don’t want to give away the value potential of certain portfolio companies. LPs are typically given a choice of either cashing out their interests or rolling them into the new vehicle.
The adoption of continuation funds has been ramping up as part of a GP-led secondaries surge. Such vehicles accounted for 84% of the $68 billion in GP-led secondary deals in 2021, according to investment bank Jeffries.
Another example is Accel-KKR‘s latest continuation vehicle, which amassed more than $1.76 billion to support seven companies previously housed in an earlier buyout fund of the firm. Last month, New York-based Behrman Capital also closed a roughly $500 million single-asset continuation pool for its portfolio company Micross Components, which provides microelectronic products and services for aerospace, defense, space, medical and industrial customers.
Other asset managers that have raised continuation funds in recent months include General Atlantic, Thompson Street Capital Partners and Prospect Partners Advisors, as well as venture capital firms Sequoia and HV Capital.
G Square’s new vehicle will extend the longevity of its investments in three portfolio companies—specialist care providers Accomplish and Keys Group, as well as dental care services provider Denteam.
Eurazeo Investment Manager and Schroders Capital Management AG are the anchor investors for the fund, which has received additional backing from other institutional investors.
G Square said the continuation fund will allow it to complete a wind-down of G Square Capital I, a €209 million 2011-vintage fund, and provide liquidity to investors in G Square Capital II, a €350 million vehicle closed in 2017.
G Square, founded in 2008 by Laurent Ganem, primarily invests in European mid-market companies, writing checks that typically range from €30 million to €60 million.
Featured image by Alexandr Kolesnikov/Getty Images
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