Private Equity Co-Investment

The PECO Fund is, as far as we know, a unique private equity co-investment vehicle making use of the co-investment rights received by M&A Intermediaries as a result of their placement of a deal with a private equity sponsor. PECO is a family office fund that purchases co-investment opportunities on a case-by-case basis across a wide range of industries and deal sizes.

Our proprietary investment management teams (based on deal size and industry sector) help make investment decisions on our behalf. Usually PECO sources investment opportunities arising as a matter of a contractual right held by an M&A Intermediary. Sometimes, however, a private equity GP or LP will bring co-investments to PECO because they are constrained by investment restrictions around a particular deal size and thus need to bring in additional “outside co-investors.”

The basis for creating PECO lies in the fact that, in most cases, M&A Intermediaries do not have sufficient cash to fund their co-investment rights at the deal closing. These co-investment rights typically range from 5-15% of the equity of the deals they source. Currently over 120 M&A firms source and bring co-investment opportunities to PECO. The co-investment deals brought to PECO have already been vetted and approved through due diligence for investment by leading private equity sponsors.

Over the past five years, PECO has built an extensive network of participating M&A Intermediaries. PECO becomes informed of “prescreened,” “vetted” and “investment committee approved” private equity sponsored co-investments. These deals are funded by leading private equity firms and cover a wide range of business sectors. PECO has a unique opportunity to evaluate deals not otherwise available at-large. PECO’s deals typically range from $100 million to $500 million in enterprise value. Most co-investment opportunities are in the $1 million to $25 million range per transaction. However, over the past several years, about one third of the co-investment opportunities have been between $25 million to $60 million.

Deal volume increased as more and more M&A Intermediaries began participating. PECO provides carried interest compensation to the M&A firms that bring individual deals. M&A Intermediaries keep all cash transaction fees paid by the private equity sponsors supporting each transaction.