Accel-KKR has solidified its entrance to the secondaries buyside by raising its first dedicated fund to back GP-led secondaries deals.
The software specialist headquartered in Menlo Park, California, has raised over $2.2 billion for AKKR Strategic Capital, according to a statement. LPs who committed to the fund include some of the secondaries market’s biggest buyers, including Ardian, StepStone Group, Adams Street Partners and pension fund CPP Investments.
Related story: See Venture Capital Journal’s Guide to VC Secondaries Buyers
The firm plans to lead single-asset continuation fund deals focusing on software transactions. The fund can back both third-party continuation vehicles and its own CVs, though on the latter it will not be a lead investor.
The fundraise comes 10 months after Accel-KKR emerged as the lead investor in a GP-led process involving German PE/VC firm LEA Partners. That transaction involved moving two companies out of LEA’s Fund I into a separate vehicle — Zvoove, a human resources software provider for temporary staffing, and OneQrew, a platform that connects skilled-trade companies with software manufacturers, affiliate title Secondaries Investor reported. The total transaction was reportedly worth around €650 million, including follow-on capital.
Asked why Accel-KKR decided to raise a dedicated fund that acts as a passive LP when it is best known for its direct buyout and growth expertise, co-managing partner Tom Barnds told SI the strategy enables the firm to access businesses that otherwise aren’t going to be for sale.
“We would generally prefer to buy 100 percent or 80 percent of a company, but the sponsor has chosen that they’re not going to go that route. For us, it’s less of an opportunity of what we prefer, it’s more of what is available to us,” Barnds said.
“We have to look at what the sponsor’s capabilities are and what they can do with the business. We have to have a lot of confidence in the sponsor, in addition to having a very strong view on the attractiveness of the asset or assets,” he said, adding that the firm will generally only invest in premier businesses.
Accel-KKR notes it has invested in secondaries markets for over 15 years using capital mainly from its own balance sheet. The latest fundraise is the firm’s first fund dedicated to secondaries using outside capital.
Accel-KKR has closed at least two CVs on its own assets: a $1.765 billion multi-asset deal last year involving its 2013-vintage technology buyout fund and a $1.39 billion vehicle for assets in its 2008-vintage technology buyout fund.
AKKR Strategic Capital, which closed on its hard-cap, had a $1.5 billion target. The GP commitment, including capital from its affiliates, accounts for around 24 percent of AKKR Strategic Capital’s committed capital.
Asked why secondaries buyers themselves committed primary capital to the fundraise, Barnds described the relationship as a partnership in which Accel-KKR will show dealflow to such LPs and in turn, these LPs will show dealflow to the firm.
“We’re the sector specialist…we bring the software specialization. We bring a lot of dealflow [and] they also bring dealflow,” he said, adding that such firms are oftentimes generalist funds which focus mainly on larger transactions.
“We’re going to bring them opportunities. They’re going to bring us opportunities and we’re going to help each other figure out which are the very best ones,” he added.
Market participants are increasingly expecting greater sector specialization in the secondaries market, as Secondaries Investor has reported. Buyout firms known for sector specialization including TPG, Leonard Green & Partners and Astorg have all either raised or are raising dedicated GP-led funds to back concentrated deals.
Active specialist secondaries investors may not necessarily have frictionless time backing deals. Sources have pointed out that a large-cap software-focused GP might not want secondaries capital from another large-cap software-focused GP in its continuation fund for competitive reasons. On the other hand, a lower mid-market European tech firm might find the idea of accepting secondaries capital from a mid-market West Coast-based tech and growth GP a particularly valuable opportunity.
“If I’m a GP, do I want plain vanilla passive capital from a secondaries fund, or do I want slightly more active capital that comes with sector expertise and access to specialized networks?” the former head of private equity at a US public pension fund told SI this year.
Accel-KKR has solidified its entrance to the secondaries buyside by raising its first dedicated fund to back GP-led secondaries deals.
The software specialist headquartered in Menlo Park, California, has raised over $2.2 billion for AKKR Strategic Capital, according to a statement. LPs who committed to the fund include some of the secondaries market’s biggest buyers, including Ardian, StepStone Group, Adams Street Partners and pension fund CPP Investments.
Related story: See Venture Capital Journal’s Guide to VC Secondaries Buyers
The firm plans to lead single-asset continuation fund deals focusing on software transactions. The fund can back both third-party continuation vehicles and its own CVs, though on the latter it will not be a lead investor.
The fundraise comes 10 months after Accel-KKR emerged as the lead investor in a GP-led process involving German PE/VC firm LEA Partners. That transaction involved moving two companies out of LEA’s Fund I into a separate vehicle — Zvoove, a human resources software provider for temporary staffing, and OneQrew, a platform that connects skilled-trade companies with software manufacturers, affiliate title Secondaries Investor reported. The total transaction was reportedly worth around €650 million, including follow-on capital.
Asked why Accel-KKR decided to raise a dedicated fund that acts as a passive LP when it is best known for its direct buyout and growth expertise, co-managing partner Tom Barnds told SI the strategy enables the firm to access businesses that otherwise aren’t going to be for sale.
“We would generally prefer to buy 100 percent or 80 percent of a company, but the sponsor has chosen that they’re not going to go that route. For us, it’s less of an opportunity of what we prefer, it’s more of what is available to us,” Barnds said.
“We have to look at what the sponsor’s capabilities are and what they can do with the business. We have to have a lot of confidence in the sponsor, in addition to having a very strong view on the attractiveness of the asset or assets,” he said, adding that the firm will generally only invest in premier businesses.
Accel-KKR notes it has invested in secondaries markets for over 15 years using capital mainly from its own balance sheet. The latest fundraise is the firm’s first fund dedicated to secondaries using outside capital.
Accel-KKR has closed at least two CVs on its own assets: a $1.765 billion multi-asset deal last year involving its 2013-vintage technology buyout fund and a $1.39 billion vehicle for assets in its 2008-vintage technology buyout fund.
AKKR Strategic Capital, which closed on its hard-cap, had a $1.5 billion target. The GP commitment, including capital from its affiliates, accounts for around 24 percent of AKKR Strategic Capital’s committed capital.
Asked why secondaries buyers themselves committed primary capital to the fundraise, Barnds described the relationship as a partnership in which Accel-KKR will show dealflow to such LPs and in turn, these LPs will show dealflow to the firm.
“We’re the sector specialist…we bring the software specialization. We bring a lot of dealflow [and] they also bring dealflow,” he said, adding that such firms are oftentimes generalist funds which focus mainly on larger transactions.
“We’re going to bring them opportunities. They’re going to bring us opportunities and we’re going to help each other figure out which are the very best ones,” he added.
Market participants are increasingly expecting greater sector specialization in the secondaries market, as Secondaries Investor has reported. Buyout firms known for sector specialization including TPG, Leonard Green & Partners and Astorg have all either raised or are raising dedicated GP-led funds to back concentrated deals.
Active specialist secondaries investors may not necessarily have frictionless time backing deals. Sources have pointed out that a large-cap software-focused GP might not want secondaries capital from another large-cap software-focused GP in its continuation fund for competitive reasons. On the other hand, a lower mid-market European tech firm might find the idea of accepting secondaries capital from a mid-market West Coast-based tech and growth GP a particularly valuable opportunity.
“If I’m a GP, do I want plain vanilla passive capital from a secondaries fund, or do I want slightly more active capital that comes with sector expertise and access to specialized networks?” the former head of private equity at a US public pension fund told SI this year.
