With the success of Edison’s growth equity strategy, Managing Partner Chris Sugden and ComplySci CEO Jean-Marc Levy spoke to The Deal about the “art of reinvestment” as a way to extend ownership in key assets and hold onto gains longer. Case in point, Edison’s partial exit and reinvestment strategy with ComplySci, in which Vista Equity Partners took a major stake in August 2018. As part of the transaction, Edison invested in the new holding company that owns ComplySci, giving Edison a potential second win down the road.
The reinvestment route can be a win-win for everyone involved. It allows a firm like Edison to reap the benefits of offering more stable, mature companies to larger private equity firms willing to put a premium on the risk it has taken out of the business. With ComplySci, Edison gets a second bite of the apple for a business Chris believes has “real, meaningful upside.”
“The ability to accelerate a realization, but not completely cap the upside is the punchline here," Sugden told The Deal. "You may target better than five times your investment on the first round, and then an additional two times to five times the second time."
Added Jean-Marc, who credited Chris with helping familiarize Vista with ComplySci’s business: "For me as a CEO, it's the best of both worlds... I have access to two very different ecosystems of resources that can help me. I literally have not hit a single challenge or issue with the business ... that either Edison Partners or Vista Equity have not been able to help us with."
Reinvestment success stories
In addition to ComplySci, Edison has reinvested in Premiere Healthcare Exchange (now Zelis Healthcare). After a partial exit in 2016 to Parthenon Capital Partners that generated a >10x return and >70% IRR to LPs, Edison then invested in the new portfolio company, Zelis Healthcare, that was formed when Parthenon merged Premier Healthcare Exchange with two of its other portfolio companies. As a result, Edison could realize a return of approximately 8x or better on the second investment.
A third reinvestment with cybersecurity company eSentire took place following Edison’s September 2017 partial exit to Warburg Pincus LLC. As recently as last month, we also participated in the company’s $47M funding round.
Read the full article at The Deal here (subscription required). And say hello to Chris at The Deal Economy Conference in Dallas on April 30, where he’ll be speaking on a panel, Capital Raising: Growing American Companies.