Bregal Milestone reaps 5x on Epassi Group exit; industry awaits incoming PE rules

TA Associates and Warburg Pincus buy Epassi from Bregal Milestone.

Morning Hubs!

This is Chris, on for Wire Wednesday.

We love these! Bregal Milestone is announcing this morning the sale of its Fund I portfolio company Epassi Group which provides mobile payment services, to TA Associates and Warburg Pincus. The exit will generate a more than 5x multiple, the firm said in a statement.

The company increased net revenues 6x during Bregal Milestone’s ownership period, and Ebitda by 7x, the firm said. It completed five add-ons across Europe, expanding its presence into Sweden, UK, Ireland and Italy, according to the statement.

Exits are key right now, as LPs focus in on distributions. With more exits will come a gradual easing of the tight fundraising environment.

The desire to find alternatives to landfills, coupled with growing opportunities to turn waste into renewable natural gas (RNG), drove Goldman Sachs Asset Management to invest in Synthica Energy earlier this week, Cedric Lucas, managing director in GSAM’s infrastructure business, told reporter Obey Martin Manayiti in an interview.

Many businesses are looking for new ways to dispose of waste other than dumping it in a landfill. Landfills are the third-largest source of human-related methane emissions in the US, according to the US Environmental Protection Agency. In 2022, there were 82 landfill RNG projects in the US, as compared with 11 in 2005, according to EPA.

There is a “substantial opportunity” to help customers find circular solutions that turn pre-consumer food and beverage waste, as well as other organic manufacturing byproducts, into something that is reusable, such as RNG, Lucas added.

The deal marks the first waste-to-energy investment in North America for GSAM.

Rumors abound that the SEC may soon finalize rules that could, if codified as originally proposed, fundamentally change how private equity operates, as I wrote last year.
I’m hearing the rules could be finalized in the next few weeks, even as early as next week. Yet, sources are all over the place about whether the rules will change significantly from their original form, or if the SEC will move ahead with minimal alteration despite extensive comments against the rules as they were introduced.

One of the biggest points of anxiety in the proposal is a rule that would strictly regulate firms’ use of side letters, ostensibly as a way to even the playing field for all LPs. The irony is that any forced restrictions on side letters would ultimately benefit GPs rather than the LPs who are the alleged beneficiaries of such a rule.

The SEC’s rationale in restricting side letters is that only certain preferred investors get economic or governance benefits through the use of side letters unavailable to smaller institutions. These agreements can have “material, negative effect” on other investors.
Because of this, all LPs in a fund should know what kind of secretive side deals some LPs are getting, according to the rules. Yet, many LPs rely on side letters to help mold and shape their GP relationships in a way that benefits them and their constituencies.

“Side letters, in effect, constructively advance reporting on evolving market practices, thereby promoting greater transparency to investors. Side letters are a crucial means for market innovation. Investors have limited tools to advance market practices. Side letters are key – if not the most powerful – among them,” Los Angeles County Employees’ Retirement Association CIO Jonathan Grabel wrote to the SEC last year.

The industry has dealt with side letter disclosure to some extent, through the use of what are known as Most Favored Nation clauses, which let LPs review other side letters and in some cases receive the same terms. MFN clauses work in various ways – some GPs will grant MFN reviews to every LP in a fund, while others may allow MFN reviews based on commitment size.

I wrote long ago (back in 2015!) that some GPs were making efforts to restrict the use of side letters in their funds. The process had grown unwieldy and LPs were apparently looking for side letters to address all kinds of issues, not just for the most necessary issues addressing legal or tax restrictions.

I take it that side letter ask has gotten no less burdensome over the years, and any sort of relief, even one imposed by SEC, could be viewed as a welcome change by GPs.

That’s it for me! Have a great rest of your Wednesday. Hit me up with tips n’ gossip, feedback or The Drama at or find me on LinkedIn.