Item 1.01. Entry into a Material Definitive Agreement.
Transaction Agreement
On July 7, 2021, StepStone Group Inc., a Delaware corporation (the "Company"),
StepStone Group LP, a Delaware limited partnership (the "Partnership"), and
certain wholly-owned subsidiaries of the Company, entered into a Transaction
Agreement (the "Transaction Agreement") with sellers party thereto (the
"Sellers"), Greenspring Associates, Inc., a Delaware corporation ("GA Inc.") and
Greenspring Back Office Solutions, Inc., a Delaware corporation ("GBOS Inc." and
together with GA Inc., "Greenspring") and Shareholder Representative Services
LLC, solely in its capacity as the initial Seller Representative.
Pursuant to the Transaction Agreement, the Company agreed to acquire Greenspring
and pay to Greenspring equityholders in the aggregate approximately (1)
$185 million in cash, (2) 12,643,556 shares of the Class A common stock of the
Company (the "Class A Consideration") and (3) 3,114,723 Class C units of the
Partnership (the "Class C Consideration"), each of which units are intended to
be exchangeable for one share of Class A common stock of the Company (the
"Exchange Consideration"), in each case subject to certain adjustments
(including customary adjustments for cash, debt, debt-like items, transaction
expenses and net working capital at closing) (collectively, the "Transaction
Consideration"). The Transaction Consideration is subject to a downward
adjustment at closing to account for the percentage of clients (measured by run
rate revenue) of Greenspring that do not consent to the transaction.
The Transaction Agreement also provides for the payment of up to $75 million of
additional cash consideration as an earnout payment to the Sellers, which shall
be payable in 2025 subject to achievement by Greenspring of certain management
fee revenue targets for the calendar year 2024.
Upon issuance, the Class A Consideration and Class C Consideration will not be
registered under the Securities Act of 1933, as amended (the "Securities Act"),
or other applicable securities laws, in reliance upon the exemption set forth in
Section 4(a)(2) under the Securities Act. The Company has agreed to enter into a
registration rights agreement upon the closing of the acquisition providing for
the registration under the Securities Act of the Class A Consideration and the
Exchange Consideration.
The Transaction Agreement contains customary representations, warranties and
covenants of the Sellers, Greenspring and the Company. The consummation of the
transactions contemplated by the Transaction Agreement is subject to customary
conditions, including (among others) (i) the expiration or termination of any
waiting period (and any extension thereof) under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976; (ii) the absence of any law that enjoins, restrains,
conditions, makes illegal or otherwise prohibits the consummation of the
transactions; (iii) the approval for listing of the shares to be issued as
Class A Consideration and the shares underlying the Class C Consideration;
(iv) the accuracy of the parties' representations and warranties (subject to
customary materiality qualifiers); (v) the compliance by the parties with their
respective covenants, obligations and agreements under the Transaction Agreement
(subject to customary materiality qualifiers); (vi) the revenue run rate for all
consenting clients of Greenspring being greater than 85% (in the case of the
Company's condition to closing) of the revenue run rate for such clients as of
March 31, 2021 and (vii) the revenue run rate for all consenting clients of
Greenspring being greater than 75% (in the case of Greenspring's condition to
closing) of the revenue run rate for such clients as of March 31, 2021. In
addition, the Company has agreed to defer the closing until the earlier of
(x) November 8, 2021 and (y) two business days following the date that the
Company determines, in good faith, that it is no longer likely to receive a
material amount of additional client consents.
The Transaction Agreement also provides that the parties may terminate the
Transaction Agreement under certain circumstances, including: (i) by mutual
written consent of the Company and GA Inc.; (ii) by either the Company or GA
Inc. if the closing of the transaction shall not have occurred on or before
January 31, 2022; (iii) by either the Company or GA Inc. for certain material
breaches of the Transaction Agreement that are not cured; or (iv) by the Company
if GA Inc. or GBOS Inc. fail to deliver the applicable stockholders consents
approving the mergers shortly after the signing of the Transaction Agreement.
In the event the Transaction Agreement is terminated by GA Inc. due to the
Company's failure to consummate the transactions as required under the
Tranasaction Agreement once all of the conditions to the Sellers' obligation to
close the transaction have been satisfied or waived (other than those conditions
that, by their terms, are to be satisfied at the closing), or due to a breach by
the Company of any covenant or agreement, or if any representation or warranty
of the Company shall be or have become untrue or inaccurate, in either case,
such that any of the closing conditions of the Company would not be satisfied,
and any such breach, untruth or inaccuracy is not timely cured, under the
Transaction Agreement, the Company will be required to pay Greenspring a reverse
termination fee of $36,250,000.
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At the closing of the transactions contemplated by the Transaction Agreement,
the Company and the Partnership will also amend and restate the existing
Stockholders Agreement of the Company and the existing Limited Partnership
Agreement of the Partnership, in each case, to provide for certain governance
and other rights and restrictions applicable to the Sellers that are issued
Class A Consideration and Class C Consideration. In addition, at the closing,
certain of the Sellers, the Company and the Partnership will enter into an
exchange agreement that provides certain conversion rights into Class A common
stock of the Company and restrictions with respect to the Class C Consideration.
The description of the Transaction Agreement and ancillary agreements annexed
thereto does not purport to be complete and is subject to, and qualified in its
entirety by, the full text of the Transaction Agreement and such ancillary
agreements, copies of which are attached to this Current Report on Form 8-K as
Exhibit 2.1 and incorporated by reference into this Current Report on Form 8-K.
The Transaction Agreement has been attached to provide investors with
information regarding its terms. It is not intended to provide any other factual
or disclosure information about the Company or the other parties to the
Transaction Agreement. In particular, the assertions embodied in the
representations and warranties contained in the Transaction Agreement are
qualified by information in confidential disclosure schedules provided by the
parties in connection with the signing of the Transaction Agreement. The
confidential disclosure schedules contain information that modifies, qualifies
and creates exceptions to the representations and warranties in the Transaction
. . .
Item 7.01. Regulation FD Disclosure.
On July 7, 2021, the Company issued a press release announcing the execution of
the Transaction Agreement. A copy of the press release is furnished as Exhibit
99.1 to this Current Report on Form 8-K. The Company also published a
presentation with respect to the acquisition. The presentation can be found at
https://shareholders.stepstonegroup.com/.
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Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. Description
2.1 Transaction Agreement, dated July 7, 2021, by and among,
StepStone Group Inc., StepStone Group LP, certain wholly-owned
subsidiaries of StepStone Group LP, the sellers party thereto,
Greenspring Associates, Inc. and certain of its affiliates and
Shareholder Representative Services LLC, as Seller Representative.
10.1 Commitment Letter, dated as of July 7, 2021, by and among
StepStone Group Inc. and JPMorgan Chase Bank, N.A..
99.1 Press Release of StepStone Group Inc. dated July 7, 2021.
104.1 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
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