P10 to Acquire Venture Debt Lender Westech Investment Advisors
Posted on 08/26/2022
P10, Inc. (NYSE: PX), a private markets solutions provider, entered into a Purchase and Sale Agreement to acquire through its subsidiary, P10 Intermediate Holdings LLC, all of the outstanding membership interests of Westech Investment Advisors LLC, a California limited liability company (WTI). The closing of the Transaction is expected to occur in the fourth quarter of 2022, subject to customary closing conditions.
As a pioneer in venture debt, WTI has deployed $7.8 billion in loan commitments across more than 1,400 venture-backed companies since its founding in 1980. Many publicly traded U.S. technology companies, representing over $1 trillion in aggregate market capitalization, count WTI as an early lender and partner.
Transaction Overview
At closing of the transaction, P10 will acquire 100% of the outstanding membership interests in WTI, the management company that receives management fees from all active WTI funds, in exchange for US$ 97,000,008 in cash and 3,916,666 membership units of P10 Intermediate Holdings, LLC which can be exchanged into 3,916,666 shares of P10 common stock, following applicable restrictive periods. Further, the purchase agreement includes additional earnout milestones as EBITDA grows, with a total of US$ 70 million available in earnout payments, in the form of cash or shares of P10 common stock, if EBITDA builds to US$ 25 million. Earnout hurdles are at US$ 20 million, US$ 22.5 million, and US$ 25 million of EBITDA.
P10 intends to use available cash and borrowings under its credit agreement to fund the cash portion of the purchase price.
Consistent with the P10 approach to long-term alignment, WTI employees will retain 100% of the carried interest generated by WTI funds. Furthermore, the existing WTI management team will continue to run day-to-day operations and oversee all investment decisions with no expected change in investment strategy. Upon the closing of the Transaction, P10 will grant an aggregate of four million stock options to acquire shares of common stock of P10 to WTI employees. In line with current P10 option grants, the stock options will have a five-year cliff vest to encourage long-term retention and firm performance.
Advisors
Colchester Partners LLC served as financial advisors and Skadden, Arps, Slate, Meagher & Flom LLP served as legal counsel to WTI on the transaction. Gibson, Dunn & Crutcher LLP served as legal counsel to P10.