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Paul Hastings’ Continuation Vehicles Snapshot shows growing efficiency of the market

Law firm Paul Hastings has launched the inaugural Continuation Vehicles Snapshot from its Secondaries team.

The Snapshot outlines the key terms of the continuation vehicles (CVs) that Paul Hastings advised on between Q4 2021 and Q1 2022, offering a useful insight into the provisions found in CVs’ legal documentation. The CVs span a variety of sectors, ranging from healthcare to media. The average size of each was $700m, while total commitments exceed $5bn, and approximately 70% of the CVs related to single-asset deals.
 
Notably, almost a third (29%) of deals involved sponsors providing 10% of the investor commitment to the CV. In addition, almost three-quarters (74%) of CV waterfalls have a ratchetted carry mechanic. In place of a direct sponsor commitment, CVs included mechanics providing for 100% rollover of sponsor commitment from existing funds, and 100% investment in the CV of crystallised carry from existing funds.
 
When it comes to the management fees of such vehicles, two thirds (67%) of vehicles saw 1-2% of invested capital charged as a management fee. One in four CVs charged either an ongoing monitoring fee and/or a one-off transaction fee at portfolio company level instead of management fees at CV level.

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