Look, exits! Soundcore sells Custom Goods, Eagletree sells Sparks

KKR opens a new office in LA.

Morning Hubsters!

This is Chris, on for Wire Wednesday.

Coupla Exits
The industry needs exits; this has been our mantra for the year. The dreaded denominator effect has faded out a bit as public markets have recovered. However, the big challenge for many GPs is the slow down in exits and their ability to distribute back to LPs in older funds.

This year, realizations are key, according to a recent survey from Capstone Partners, reinforcing a point we’ve made here in this column. “Realizations are key even in established GP relationships, with the bar for new relationships remaining very high,” the survey said.

Some numbers around this from the survey:
• 38 percent of North American LP respondents are willing to commit to a fund when there’s been no realizations in the prior fund;
• 99 percent of North American LP respondents are willing to commit to new managers if the prior fund DPI is up to 0.5x;
• 18 percent of North American LPs expect “meaningful distributions” from the prior funds in re-ups

North American investors are more willing than their overseas counterparts to commit to a re-up with minimal DPI but want to see strong underlying portfolio performance, the survey said.

With this in mind, two exits have crossed the Wires since yesterday. Soundcore Capital, which is in the market raising its Fund III, completed the sale of logistics company Custom Goods to Angeles Equity.

Soundcore acquired the company in 2020, its fourth portfolio company out of Fund II. Read more here on PE Hub.

“Recognizing the significant growth potential of third-party logistics businesses, we have been pursuing a diversified asset-light platform that has compelling upside potential,” said Sam Heischuber, managing director at Angeles Equity Partners. “The diversification of Custom Goods’ end markets and customers and distinctive service offerings across transportation and logistics make this an ideal investment for us. The tailwinds in this sector should provide for continued organic growth and also create attractive opportunities for follow-on M&A.”

Meanwhile, Eagletree Capital exited its investment in Sparks, a Philly-based marketing agency. Eagletree initially invested in Sparks in 2020. Read more here.

Eagletree invested in the company through its fifth fund. The firm partnered with Sparks’ management group led by Scott Tarte and Jeff Harrow.

New office
KKR opened a new office in Los Angeles to expand its West Coast presence initially across real estate, private equity, private wealth and institutional client relationship teams, the firm said in a statement. The firm has about 250 employees in California across three offices.

“We deliberately selected a location that provides flexibility for further expansion to support the needs of our business,” said Ryan Stork, partner and chief operating officer at KKR.

Read more here on PE Hub.

That’s it! Have a great rest of your day. Reach me with tips n’ gossip, feedback or book recommendations at cwitkowsky@pei.group or find me on LinkedIn.