The Anatomy of an SPV
By: Bobby Dormanesh
The industry is seeing a growing trend in Special Purpose Vehicles (SPVs). SPVs are similar to traditional funds – investment vehicles used to pool money from investors – but a SPV makes an investment in a single portfolio company. Taking it a step further, the investment opportunity is already identified prior to when capital is called. Here’s why investors and fund managers look to SPVs.
Investor perspective
- Access – In an environment of growing mega-funds and investment minimums, SPVs provide a simplified alternative for investors to penetrate the market and/or deploy additional capital. Since the SPV is making a concentrated investment, it doesn’t require as much capital as a traditional fund, resulting in lower investment minimums for investors. Additionally, SPVs typically offer more favorable terms to investors.
- Transparency – In a typical fund, investors are investing into a fund manager’s strategy over the course of multiple years and don’t have input on specific portfolio company investments. Conversely, when investing in a SPV, investors don’t have to participate in investments that they are not interested in because they have full transparency on the what the investment will be. All capital is called upfront and invested directly into a portfolio company.
Fund manager perspective
- Proof of concept – SPVs are a great tool for emerging managers who looking to establish a track record, grow overall AUM, and develop relationships with limited partners.
- Timing – Sometimes a great investment opportunity comes along that requires speed. Rather than waiting one to two years to raise a fund, utilizing a SPV provides a quick alternative to deploying capital. Furthermore, if a fund is already fully deployed, SPVs serve as a solution to make follow-on investments.
How we can help
CLA is here to help you step into this growing trend of using SPVs to make investments. Our fund services team is ready to assist your back office with fund administration so that you can find your next target. We also have teams of industry specialist ready to help you meet your compliance needs. Our digital team can create dashboards summarizing relevant KPIs across the portfolio and dashboards that provide detailed look into each of your investments.
Craig Arends is a principal at CLA and is the managing principal of CLA's private equity practice. Craig brings a concentration of experience in providing accounting and transaction structuring advice for leveraged recapitalizations, purchase accounting and SEC reporting, assessing quality of earnings, and GAAP accounting. He has far-reaching experience with critiquing financial models and reviewing target companies' financial performance to identify cost reductions and/or operating efficiencies Craig has more than 30 years of experience in public accounting serving public companies, private equity groups, and companies, including a term as principal in charge of a Big Four Capital Markets Group in Moscow, Russia. He has led financial accounting due diligence projects for private equity investor groups and venture capital funds, primarily in the technology, communications, and manufacturing industries, as well as assisting with Foreign Corrupt Practice Act matters ranging from investigation of payments made, validation of compliance with corporate policies, and review of proposed transactions to ensure compliance. When not working, Craig enjoys watching any sports, but his most favorite are baseball, football and soccer.
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