Lovell Minnick, once an SRS client, now an owner

SRS Acquiom has provided professional and technical services to some of the biggest names in private equity and venture capital. Now, SRS finds itself owned by one of its customers.

Lovell Minnick Partners has acquired a majority of SRS. Terms weren’t disclosed. The deal closed last week, said Steve Pierson, a Lovell Minnick managing partner.

The sellers include SRS’s management, which had a large stake, as well as Revolution Ventures and Top Tier Capital, he said. The sellers are rolling over parts of their holding, he said.

“No one is fully exiting,” Pierson said. “They’re all rolling, which I took as a real positive.”

SRS CEO Paul Koenig co-founded the company in 2007 along with Mark Vogel, vice chairman, and VC Jason Mendelson. Mendelson is co-founder and a managing director of Foundry Group.

SRS Acquiom, Denver, provides M&A closing services like payments, escrows, and reps and warranties insurance brokerage, along with after-closing items like compensation payments and shareholder representation.

(SRS stands for the original business, Shareholder Representative Services, while Acquiom is a combination of acquisition and axiom.)

Clients include TPG Capital, Goldman Sachs Private Equity GroupBain Capital Ventures, Bessemer Venture Partners and Sequoia Capital. SRS also offers an M&A database to help dealmakers figure out the best transaction terms.

SRS has worked on 2,200 deals, valued at more than $340 billion. With the sale, management will continue in their current roles.

“One hundred percent of management is staying,” Koenig said. “I’m staying in my role. We have a lot of work to do and this will help us do it.”

SRS currently numbers about 140 people. Koenig expects that to jump to 150 by year’s end.

SRS has always received interest from outside parties but the activity “picked up in earnest” about 18 months ago, Koenig said.

The volume was enough that SRS thought it might make sense to run a process, reach out to a handful of parties, and see what options were available.

The company hired Davies Beller and James Kissane of Cowen & Co in May. Koenig wouldn’t say whether Lovell’s bid was the highest but said Lovell’s culture matched SRS the best.

“It was a very attractive, fair offer they made,” Koenig said.

A new asset class

SRS started out administering escrows for selling shareholders, including many VCs, said David Golden, a Revolution Ventures managing partner.

Typically, when a company is sold, buyers will insist that a portion of the purchase price go into escrow to protect them from future liability. Large banks, like JP Morgan and Wells Fargo, offer escrow services but usually at low interest rates.

“No one had focused on this before,” Golden said.

SRS’s business became interesting when it began managing the funds and offering shareholders a higher rate of return, he said. That happened around 2014. “We thought it was really cool idea to get the guys into the asset-management business,” Golden said.

SRS ended up raising about $16 million in VC funding. About $7.5 million came from Revolution, he said.

“They got into the asset-management business for an asset that no one was paying attention to,” Golden said. “I give them a lot of credit; it was a new asset class.”

The deal comes as Lovell Minnick is expected to begin marketing for its latest buyout fund. Lovell is targeting $1 billion for Fund V, Buyouts has reported. Pierson declined comment.

Lovell Minnick used its fourth fund, which closed on $750 million in November 2015, to invest in SRS.

Action Item: For more information, call Paul Koenig at +1 303-957-2850