Lexington Partners Explained

Lexington Partners
Type:	Subsidiary
Industry:	Private equity
Location:	New York, New York, U.S.
Products:	Secondary Investments, Equity co-investments, Fund Investments
Aum:	$55 billion
Parent:	Franklin Templeton

Lexington Partners is one of the largest manager of secondary acquisition and co-Investment funds in the world, founded in 1994. Lexington manages approximately $55 billion of which an unprecedented $14 billion was committed to the firm's ninth fund (Lexington Capital Partners IX, closed in January 2020), the largest dedicated secondaries pool of capital ever raised at the time.^[1]

Lexington Partners is headquartered in New York with offices in Boston, Menlo Park, London, Hong Kong, Santiago, São Paulo and Luxembourg.

History

Lexington Partners was founded by Brent R. Nicklas.^[2] Formerly a founding member of Landmark Partners, Nicklas helped pioneer the formation of the secondary market and was involved in some of the earliest secondary deals dating back to 1993.^[3]

On November 1, 2021, Franklin Templeton announced they would acquire 100.0% of Lexington Partners in a $1.75billion cash deal.^[4] This acquisition was finalized on April 5, 2022.^[5]

Investment program

Lexington invests much like a fund of funds, purchasing interests in various investment funds, typically structured as limited partnerships. Lexington Partners acquires positions in venture capital, leveraged buyout and mezzanine capital funds, together with portfolios of companies or stakes in companies from institutions, corporations, government bodies and family offices.^[6]

Lexington is a dedicated secondaries investor^[7] and like many of its peers has limited ability to make new commitments to private equity funds. While in certain instances this impacts the firm's desirability to general partners as a replacement limited partner, Lexington does make strategic commitments to newly formed private equity funds. The firm also manages equity co-investment vehicles^[8] that invest alongside global private equity sponsors. Lexington's secondary funds have committed to over 500 newly formed private equity funds while Lexington's co-investment funds have committed to invest over $7.0 billion in over 400 co-investments in the U.S., Europe and Asia.^{[9] [10]}

Lexington's limited partners include public and corporate pension funds, sovereign wealth funds, insurance companies, financial institutions, endowments, foundations, and family offices from over 40 countries.

Notable transactions

Since 1994, Lexington has stated that it has completed over 500 secondary market transactions.^{[11] [12]} Although most secondary transactions are private, the following are notable publicly disclosed transactions and firm milestones:

• 2022 – Franklin Templeton finalizes the acquisition of Lexington Partners for $1.75Bn in a 100.0% all cash transaction.^[5]
• 2021 – Lexington Partners begins marketing and raising Lexington Partners X and its associated vehicles, targeting a $15.0BN fundraising target^[13]
• 2020 – Lexington Partners raised a record $14 billion for Lexington Partners IX and its associated vehicles^[14]
• 2018 – Lexington Partners leads a $1.2 billion Warburg Pincus Asia secondary deal.
• 2017 – Lexington Partners sealed a $1 billion secondary deal with London-based BC Partners.^{[15] [16]}
• 2017 – Lexington picks up VC portfolio stake from German broadcaster ProSiebensat.^[17]
• 2016 – Lexington Partners opened an office in Santiago, Chile. The new office will serve as Lexington's regional hub in Latin America and it is the sixth location for the firm.^[18]
• 2015 – Together with Lothian Pension Fund, Lexington Partners purchased a stake in a tail-end Macquarie fund from the Royal Ordnance (Crown Service) Pension Scheme Trustees.^[19]
• 2015 – Lexington Partners beat its targeted $8 billion, closing its eighth private equity secondary fund at its $10.1 billion hard cap.^[20] LCP VIII is the biggest secondaries fund ever raised.^[21]
• 2014 – J.P. Morgan to Sell Roughly Half Its Stake in One Equity Partners^[22]
• 2013 – Lexington Partners closed Lexington Co-Investment Partners III LP which drew over $1.5 billion in capital.^[23] This led to an expansion of Lexington's co-investment program to around $4 billion in total capital.^[24]
• 2011 – Lexington Partners raised $7 billion for its seventh global secondary fund (LCP VII).^[25]
• 2010 – Citi Unloaded $900 Million Private Equity Portfolio.^[26]
• 2008 – CalPERS agreed to the sale of a portfolio of legacy private equity funds, having started marketing it in late 2007. A buyer group comprising Oak Hill Investment Management, Conversus Capital, Lexington Partners, HarbourVest, and Pantheon Ventures paid as much as $1.5 billion for the portfolio.^[27]
• 2007 – Lexington Partners lead a secondary spin-out transaction from a hedge fund, a $200 million transaction to acquire 70% stake in 19 investments.
• 2006 – American Capital Strategies sold a $1 billion portfolio of investments to a consortium of secondary buyers including Lexington Partners, HarbourVest Partners and Partners Group.^[28]
• 2005 – Lexington Partners and AlpInvest Partners acquired a portfolio of private equity fund interests from Dayton Power & Light, an Ohio-based electric utility.^[29]
• 2004 – Lexington Partners formed a dedicated secondary fund to acquire private equity interests that were less than 50% funded.^[30]
• 2003 – Lexington closed on $2 billion for its fifth fund after two years of marketing.^[31]
• 2000 – Lexington Partners and Hamilton Lane acquired $500 million portfolio of private equity funds interests from Chase Capital Partners.^[32]
• 2000 – Coller Capital and Lexington Partners completed the purchase of over 250 direct equity investments valued at nearly $1 billion from NatWest.^[33]
• 1998 – Lexington Partners established CIP I, one of the first independent, discretionary co-investment programs with a leading U.S.-based institutional investor.
• 1994 – Lexington Partners purchased a portfolio of mezzanine fund interests from a bank, one of the first transactions of its type.

Notes and References

1. Web site: Lexington collects $14bn for biggest-ever secondaries fund. Le. Adam. 2020-01-15. Secondaries Investor. en-US. 2020-03-05.
2. AVCJ Interview http://www.avcj.com/avcj/interview/51233/lexington-eyes-bumper-deal-flow, A Private Word With Brent Nicklas https://www.lexingtonpartners.com/wp-content/uploads/2020/12/A-private-word-with-Brent-Nicklas.pdf
3. News: Lexington Partners Promotes Wilson Warren to President Role. 2018-06-21. Wall Street Journal. 2019-01-20.
4. News: Franklin Templeton to buy Lexington Partners for $1.75 bln as part of secondaries push . 1 November 2021 . . Niket . Nishant . Chibuike . Oguh.
5. Web site: Franklin Templeton finalises takeover of Lexington Partners . 5 April 2022 .
6. Web site: Lexington Partners LP. March 5, 2020. Bloomberg.
7. News: Private equity secondaries become a more liquid proposition. 2016-11-01. Private Equity Wire. 2017-09-19. en.
8. Web site: Lexington raises $1.6bn for co-investments. 2013-07-17. Private Equity International.
9. Web site: Our Team. Lexington Partners. en-US. 2019-10-24.
10. Web site: Lexington leads $1.2b Warburg Pincus Asia secondary deal. Burroughs. Tim. 2017-10-04. AVCJ. en. 2019-10-24.
11. News: Lexington to Back Up to €1.8 Billion Stapled Secondary Deal With BC Partners. Ballard. Ed. 2017-07-06. Wall Street Journal. 2017-09-28. Kreutzer. Laura. en-US.
12. Web site: Warburg said to eye $1.2bn Asia secondaries selloff to Lexington, others AltAssets Private Equity News. Didymus. Mike. 4 October 2017 . en-US. 2019-10-24.
13. News: Farman . Madeleine . Lexington nears $15bn target in crowded fundraising market . 27 November 2023 . 1 December 2022.
14. Secondaries Investor, January 15, 2020 https://www.secondariesinvestor.com/lexington-collects-14bn-for-biggest-ever-secondaries-fund/, AltAssets, January 15, 2020 https://www.altassets.net/private-equity-news/by-pe-sector/secondaries-by-pe-sector/lexington-partners-amasses-14bn-for-ninth-secondaries-fundraise.html, Wall Street Journal, January 15, 2020 https://www.wsj.com/articles/lexington-raises-record-14-billion-for-private-equity-secondary-fund-11579087800, Pensions & Investments, January 15, 2020 https://www.pionline.com/investing/lexington-partners-raises-14-billion-newest-alts-fund, Pitchbook, January 16, 2020 https://pitchbook.com/newsletter/lexington-pulls-in-record-14b-secondaries-fund-Lvj AVCJ, January 15, 2020 https://www.lexingtonpartners.com/wp-content/uploads/2020/02/AVCJ_2020_Jan-21_Secondaries-Stalwart.pdf
15. News: Lexington Seals $1 Billion Secondary Deal With BC Partners. Kreutzer. Laura. 2017-08-14. Wall Street Journal. 2017-10-10. en-US.
16. News: Lexington Eyes Record-Breaking $12 Billion Fund to Buy Private-Equity Stakes. Louch. William. 2018-02-22. Wall Street Journal. 2018-03-04. Lim. Dawn. en-US.
17. News: ProSiebenSat.1 sells venture capital portfolio to Lexington: Reuters – PE Hub. 2017-06-28. PE Hub. 2017-10-10. en-US.
18. Web site: Lexington expands LatAm presence with Chile office AltAssets Private Equity News. Hammond. Jack. altassets.net. 25 February 2016 . en-US. 2017-10-10.
19. News: Lexington, Lothian buy Macquarie infra stakes from BAE. Le. Adam. 2015-11-05. Secondaries Investor. 2017-10-10. en-US.
20. Web site: Lexington Closes LCP VIII on $10.1B PitchBook. pitchbook.com. en. 2020-03-05.
21. AVCJ, April 22, 2015 http://www.avcj.com/avcj/news/61346/lexington-raises-largest-ever-secondaries-fund, AltAssets, April 22, 2015 http://www.altassets.net/private-equity-news/by-news-type/fund-news/lexington-closes-biggest-ever-secondaries-vehicle-on-10-1bn.html, PE HUB, April 21, 2015 http://www.pehub.com/2015/04/lexington-partners-raises-10-1-bln-for-eighth-secondary-fund/, Real Deals, April 22, 2015 http://realdeals.eu.com/news/2015/04/22/lexington-closes-record-secondaries-fund/, Law 360, April 21, 2015 https://www.law360.com/articles/645808/lexington-raises-10b-for-its-largest-secondary-market-fund
22. News: JPMorgan's One Equity finds path to independence – PE Hub. 2014-08-12. PE Hub. 2017-10-10. en-US.
23. News: Lexington Partners closes CIP III fund. 2013-07-17. Venture Capital Post. 2017-10-10. en.
24. News: Lexington Partners closes third co-investment fund at nearly $1.6 billion. Kozlowski. Rob. 2013-07-17. Pensions & Investments. 2017-10-10. en-US.
25. Web site: Lexington Partners raises $7bn for largest ever secondaries fund AltAssets Private Equity News. 30 November 2001 . 2020-12-06. en-US.
26. http://www.pehub.com/2010/07/exclusive-citi-unloads-900-million-private-equity-portfolio/ PE HUB
27. Web site: For CalPERS, Out With Old, In With New. Serv. Cust. 2008-02-18. Buyouts. en-US. 2020-03-05.
28. Web site: American Capital raises $1bn fund AltAssets Private Equity News. altassets.net. 30 November 2001 . en-US. 2017-10-10.
29. https://www.altassets.net/private-equity-news/alpinvest-and-lexington-partners-buy-1-2bn-secondary-portfolio-from-dpl.html AlpInvest and Lexington Partners buy $1.2bn secondary portfolio from DPL
30. Web site: Lexington Aims at Middle Market. Meikle. Brad. 2005-08-22. Buyouts. en-US. 2020-03-05.
31. https://www.altassets.net/private-equity-news/us-secondaries-specialist-lexington-partners-closes-fund-on-2bn.html US secondaries specialist Lexington Partners closes fund on $2bn
32. Web site: Meikle. Brad. 2000-12-18. Chase Unloads $1 Billion LP Portfolio. 2021-12-24. Buyouts. en-US.
33. https://www.collercapital.com/royal-bank-scotland-asset-sale The Royal Bank of Scotland: asset sale