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The real story behind that big Warburg Pincus sale

October 29, 2015, 4:43 PM UTC
FRANCE-GOVERNMENT-ECONOMY-AWARD
Marc Ladreit de Lacharriere Chief Executive Officer of Fimalac delivers a speech during the "Audacity creative" award at the French Elysee palace, on September 15, 2015 in Paris. AFP PHOTO PATRICK KOVARIK (Photo credit should read PATRICK KOVARIK/AFP/Getty Images)
Photograph by Patrick Kovarik — AFP/Getty Images

Warburg Pincus yesterday announced that the family office of French businessman Marc Ladreit de Lacharriere “has made an investment resulting in a 5% stake in the private equity firm.”

But this is not a transaction whereby Warburg Pincus will use proceeds for management liquidity or to set a valuation ahead of IPO. Instead, sources say that the deal is actually for a 5% stake in the carried interest stream of both existing and future Warburg Pincus funds (including its new flagship vehicle — Fund XII — which soon will close on around $12 billion). No governance or voting rights in the firm’s management company are included.

The proceeds will be directed largely into Warburg Pincus funds, including to fill a massive $800 million GP commitment to Fund XII.

If this sounds a bit familiar, that may because Warburg Pincus previously struck a similar a similar deal with Merrill Lynch, which expires with the firm’s eleventh flagship fund (the new deal, I’m told, is indefinite).

This transaction represents Lacharriere’s first investment with Warburg Pincus.

A Warburg Pincus spokesman declined comment beyond the press release.