Business Context and Reporting Period
StepStone Group Inc. filed this Form 8-K on July 7, 2021, reporting entry into a definitive agreement to acquire Greenspring Associates, Inc. and Greenspring Back Office Solutions, Inc. The transaction would expand StepStone’s private markets investment-management platform.
Transaction Terms and Key Financial Metrics
- Consideration consists of approximately $185 million in cash, 12,643,556 shares of Class A common stock, and 3,114,723 Class C partnership units, subject to customary closing adjustments.
- Additional cash consideration of up to $75 million may be payable to sellers in 2025, based on Greenspring’s achievement of specified 2024 management-fee revenue targets.
- The transaction consideration is subject to a downward adjustment based on the percentage of Greenspring client revenue that does not consent to the transaction.
- StepStone expects to fund the acquisition with debt or equity financing, cash on hand, or a combination of these sources.
- JPMorgan Chase Bank, N.A. committed to provide a $175 million, 364-day senior secured bridge term loan facility, subject to customary conditions.
- The filing does not provide operating revenue, profit, cash flow, margins, debt balances, or liquidity metrics for StepStone or Greenspring.
Material Changes and Transaction Conditions
- The acquisition remained subject to customary closing conditions, including antitrust clearance, regulatory and listing approvals, accuracy of representations and warranties, covenant compliance, and required stockholder consents.
- StepStone’s closing condition required consenting Greenspring clients to represent more than 85% of the relevant March 31, 2021 revenue run rate; Greenspring’s corresponding condition required more than 75%.
- Closing was deferred until the earlier of November 8, 2021, or two business days after StepStone determined that it was unlikely to receive a material amount of additional client consents.
- Either StepStone or Greenspring could generally terminate the agreement if closing had not occurred by January 31, 2022, subject to specified conditions and exceptions.
- StepStone could owe Greenspring a $36.25 million reverse termination fee in specified circumstances involving failure to close or an uncured StepStone breach.
- The Class A shares and Class C units were to be issued in reliance on an exemption from registration. StepStone agreed to provide registration rights upon closing.
Guidance, Outlook, Risks, and Unusual Items
- Management did not provide financial guidance or quantified operating forecasts in the filing.
- The transaction is exposed to client-consent risk, regulatory and antitrust approval risk, financing availability, closing-condition risk, and potential purchase-price adjustments.
- The bridge facility commitment is contingent on definitive financing documentation and consummation of the acquisition. Availability may be reduced by other debt or note issuances before closing.
- The earnout creates a contingent future cash obligation of up to $75 million based on 2024 management-fee revenue performance.
- At closing, the parties expected to amend StepStone’s stockholders agreement and partnership agreement and enter into an exchange agreement governing seller rights, conversions, and transfer restrictions.
Important Facts for Investors to Verify
- Whether the acquisition ultimately closed and the final cash, equity, debt, and earnout consideration paid.
- The percentage of Greenspring clients and revenue that provided consent and any resulting purchase-price adjustment.
- Whether StepStone drew on the bridge facility and the resulting effect on leverage, interest expense, and liquidity.
- Greenspring’s contribution to assets under management, management-fee revenue, earnings, and cash flow after closing.
- The status and terms of the registration rights, amended governance agreements, and seller exchange rights.
- Any subsequent filings describing transaction termination, closing conditions, integration costs, or contingent liabilities.