Business Context and Reporting Period
StepStone Group Inc. filed this Form 8-K on September 20, 2021, reporting the completion of its acquisition of Greenspring Associates, Inc. and Greenspring Back Office Solutions, Inc. The transaction expanded StepStone’s private markets investment platform and was completed pursuant to a July 7, 2021 transaction agreement.
Transaction and Key Financial Terms
- Aggregate consideration consisted of approximately $185 million in cash, 12,686,756 shares of Class A common stock, and 3,071,519 Class C units of StepStone Group LP.
- Each Class C unit is exchangeable, subject to specified conditions, for one share of Class A common stock.
- Up to $75 million of additional cash consideration may be payable to the sellers in 2025 if Greenspring achieves specified 2024 management-fee revenue targets.
- The cash consideration was funded through a new $225 million multicurrency revolving credit facility with a five-year maturity and a letter-of-credit subfacility of up to $10 million.
- The Company initially incurred borrowings under the facility to fund the acquisition and then assigned the facility to StepStone Group LP, which became the sole borrower.
Material Changes Versus the Prior Comparable Period
The filing reports a completed acquisition and the creation of new acquisition-related financing and equity arrangements. It does not provide comparative revenue, earnings, cash flow, margin, debt-balance, or liquidity figures for a prior period.
Guidance, Outlook, Risks, and Unusual Items
- The potential $75 million earnout is contingent on Greenspring achieving specified calendar-year 2024 management-fee revenue targets and is payable in 2025.
- The revolving credit agreement contains customary events of default, including nonpayment of interest, financial covenant breaches, insolvency events, and other covenant violations, which could permit acceleration of the debt.
- Securities issued to former Greenspring equityholders were unregistered and issued under applicable Securities Act exemptions.
- Shares issued to certain sellers are subject to transfer restrictions for a maximum of three years, subject to exceptions. The sellers also received registration rights, including demand, shelf, and piggyback rights.
- The filing states that Greenspring’s required financial statements and related pro forma financial information would be filed in an amendment within 71 calendar days.
Important Facts for Investors to Verify
- Review the later Form 8-K amendment for Greenspring’s historical financial statements and pro forma results.
- Confirm the final transaction consideration after closing adjustments for cash, debt, debt-like items, transaction expenses, and working capital.
- Verify borrowings, interest rates, financial covenants, and available capacity under the revolving credit facility.
- Assess the likelihood and accounting treatment of the up-to-$75 million contingent earnout.
- Review dilution, exchange mechanics, transfer restrictions, and registration rights associated with the shares and Class C units issued to the sellers.