An established lower middle-market buyout manager (‘Sponsor’) held a minority interest in a portfolio company controlled by a much larger private equity firm associated with a legacy strategic acquisition. When the company was recently sold to a continuation vehicle (‘CV’), the Sponsor elected to sell its interest in the portfolio company, receiving 50% of proceeds net of CV fees and expenses at closing, with the balance payable as a contractually fixed deferred payment obligation (‘Receivable’) of the CV post-closing.
While the deferred purchase price was contractually defined and not contingent on portfolio company performance or exit timing, the deferral created a timing mismatch relative to the Sponsor’s objective to accelerate liquidity and distribute capital to limited partners within the two funds that owned the legacy portfolio company interest.
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