StepStone’s Greenspring acquisition includes future carry sharing

StepStone plans to integrate the Greenspring Associates team into its existing venture and growth practice, including setting up a joint investment committee.

StepStone Group will share in a big portion of carried interest generated by Greenspring Associates funds raised after it closes its acquisition of the venture fund-of-funds manager, according to a breakdown of deal terms.

StepStone announced the acquisition of Greenspring Associates on Wednesday for $185 million in cash and $540 million in equity, along with a potential $75 million earnout based on achievement of certain revenue goals.

StepStone’s co-CEO Scott Hart on an analyst call Wednesday talked about how the structure of the deal is meant to incentivize the Greenspring team going forward.

“There is a significant equity component to the purchase price here,” Hart said. “You also have the potential for the earnout which we think will continue to help motivate and drive the team. And then some of the legacy carry left behind, we think the team continues to be incentivized to drive the best results for their existing clients and LPs.”

StepStone plans to integrate the Greenspring team into its existing venture and growth practice, including setting up a joint investment committee to evaluate venture and growth opportunities, Hart said.

The terms of the carried interest share, disclosed in an investor presentation on Wednesday, include the following:

  • $185 million in cash and $540 million in equity in Class A common shares at about $34.27 per share, and Class C units convertible to Class A common stock.
  • Potential earnout of up to $75 million payable in 2015 based on certain revenue targets.
  • StepStone will be entitled to 100 percent of fund management fee-related earnings of all Greenspring fee earning AUM and as well as a portion of carried interest from Greenspring funds that begin investing after the close of the deal.
  • StepStone will be entitled to a portion of carried interest for new funds: 25 percent of carry for new funds that have a first close and commence their investment period following the close of the deal, and before the end of 2024.
  • 50 percent of carry for new funds that have a first close in 2025 and beyond.
  • Deal does not include any accrued or future carry for legacy Greenspring funds.

Greenspring has been in market since last year with its 10th fund. The firm closed Fund IX in 2019 on $999 million.

This article first appeared in affiliate publication Buyouts