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HIG Capital launches sales process for Trace3, Butterfly Equity back in market with next fund

HIG readies sale process for Trace3, while the secondaries space is deals with a distinct lack of talent available.

Happy Thursday!

How’s your week? Any sign of things slowing down yet? Not from my perch here in the Metuchen bureau, at least …

Scoopage: HIG Capital kicked off a sales process for IT services provider Trace3, writes Milana Vinn on PE Hub today.

Trace3 was founded in 2002 by Hayes Drumwright. The company, based in Irvine, California, is led by CEO Rich Fennessy. HIG invested in the company in June 2017 and has grown through a few add-ons, Milana writes. Check it out here.

Talent: Looking for a job in private equity? The private equity secondaries space is facing a distinct lack of talent available to deal with the crush of deal flow, especially with the rise of GP-led processes.

The skill set necessary to execute GP-led deals is unusual, requiring a hybrid of a direct investor and an LP, according to Nigel Dawn, head of Evercore’s private capital advisory business.

Some of the secondary groups would say they’re fundamentally a limited partner and they will secure a significant amount of their comfort from their alignment with the general partner. That’s how they’ll evaluate things, which is not an unreasonable position to take, really understanding the manager, performance and what they plan to do with the asset.

The difference is, if you’re writing a $10 million check into a company versus a $500 million check, the depth of analysis you’ll want to do, the understanding of the sector, the company, the drivers and all that sort of thing, it’s probably, in terms of the scale, more moving towards a classic direct investor. That is a very large check and its concentration in your fund as an investor, so I think there’s a retooling going on within the secondary investing community, recognizing direct investing skill, particularly the single asset deals when you’re going to be making significant equity checks, are pretty important.

Andrew Hawkins, head of private equity solutions at ICG, said finding the talent is not quite as easy as just moving buyout GPs into GP-led roles.

What we’ve done, having learned the hard way, is we’ve actually brought people into our business at relatively junior levels … we want them to have these extraordinary relationships with the people we partner with and that requires, frankly, some humility and that’s a quality that is often somewhat lacking in the private equity world but it’s a very important quality. We’re not trying to outsmart or outfox the GP partner, we love to be helpful, constructive partners. It’s a non-trivial task to convert somebody from being a direct PE investor to being a great GP-led partner. There’s some wood to chop there.

Read our Q&A here on the talent gap in secondaries and what is driving the evolution in this market.

That’s it for today! Hit me up with your tips n’ gossip, feedback, book recommendations or whatever at or find me on LinkedIn.