Partial Sale Optimization Analysis

We are increasingly seeing GPs explore partial sales of their active deals to convert RVPI to DPI. This is especially relevant where the deals have been held for a reasonable holding period and where the company has experienced meaningful step-ups in valuation since the fund’s initial investment. When a fund is exploring this strategy the common questions are:

• What valuation should we sell at?

• What % of the investment should we sell?

Today, we are releasing a new feature that helps answer both these questions. Minimum Partial Sale Valuation Tactyc now automatically computes the Minimum Partial Sale Valuation for each active investment. This is the lowest price the fund could sell a partial position for the resulting cash flows to still be accretive to the fund’s IRR. This analysis is available under the Insights section of your fund's dashboard.

• You can flex the % Sold variable to understand how much MOIC and Gain is traded off in a partial sale

• Whether the Minimum Partial Sale Valuation is already at a discount to the latest valuation of the company

• How the Minimum Partial Sale Valuation changes by performance case (for e.g., an upside scenario projected to return a 20x would need a higher partial sale valuation than a downside scenario projected to return a 2x).

The Underlying Math At Tactyc, we are fortunate to see up close and learn from the quantitative workflows of some of the best fund managers in the world. Frequently, when we see common patterns across multiple clients - we crystallize those manual analyses into automated features. This particular analysis was one that many of our clients were already utilizing. If you are curious about the underlying math powering this analysis, check out our recent blog post on how we automated this analysis.

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Originally published in the Tactyc newsletter on June 19, 2023.