Milestone Partners explores liquidity process on older funds

Milestone Partners is considering enabling limited partners in its third and fourth funds to sell their interests as part of a broad secondary process, three sources told Buyouts.

The Radnor, Pennsylvania, firm has been in the process of selecting a secondary adviser for the deal, sources said.

The deal Milestone is exploring would let LPs cash out of their interests in the funds or hold on to their stakes. This is known as a tender offer. It’s unclear whether the GP also is considering soliciting for a slug of fresh capital that would go into a new fund as part of the secondary, known as a staple.

Founded in 1995, Milestone had been in the market with its fifth fund, according to a Form D filing from January 2018. How much the firm has raised for Fund V is unclear.

Managing Partners Scott Warren and John Shoemaker did not respond to a request for comment.

Milestone invests in the lower-middle market, in tech-enabled services, software, financial services and tech-driven manufacturing. Last year, the firm acquired mTAB LLC, which provides a cloud-based analytics platform for clients in end markets like automotive, consumer electronics and insurance. 

Milestone raised $300 million for Fund IV in 2013; $240 million for Fund III in 2009; and $120 million for Fund II in 2004.  

Fund III has been challenged, generating a 0.28 percent internal rate of return and a 1.01x multiple as of Dec. 31, 2017, performance information from Pennsylvania Public School Employees’ Retirement System shows.

Fund IV, a better performer, was producing a 13.23 percent IRR and a 1.57x multiple, Pennsylvania PSERS data shows.

The firm lost two partner-level executives in recent years: Brooke Hayes, a partner who had worked at the firm since 2002, left in 2017, according to his LinkedIn profile. Robert Levine, a partner and co-founder who had been with Milestone since 1995, left in 2010.

Milestone has a relationship with a separate firm called PeakEquity Partners, sharing the same principal office, some employees and place of business, according to Milestone’s Form ADV. PeakEquity raised $137 million for its debut fund in 2017, a statement from the firm said.

Milestone’s GP-led secondary deal is one of several such deals that are in market or expected to hit the market this year.

Last year is expected to be a milestone for secondaries-deal activity, matching or exceeding previous deal-volume tallies.

Driving the volume are GP-led deals by high-profile managers like Thomas H. Lee Partners. The firm is attempting to restructure its sixth fund, which closed on $8.1 billion in 2007.

Coller Capital, Neuberger Berman and GIC emerged as lead investors on the deal, Buyouts reported.

Action Item: Check out Milestone’s Form ADV here: https://bit.ly/2RioqIG