PRIVILEGED & CONFIDENTIAL ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP INTERNAL MEMORANDUM — MATTER CLOSING
September 12, 2024
TO: File — Matter No. 1003-00001
FROM: Elliot Nguyen, Lead Associate, Antitrust & Competition Group
REVIEWED BY: Howard Bellamy, Responsible Partner, Antitrust & Competition Group Elaine Forsythe, Billing Partner, Antitrust & Competition Group
RE: Matter Closing Memorandum — Harrowgate Private Equity Fund IV, L.P. / Ridgemark Capital Advisors, LLC — Hart-Scott-Rodino Premerger Notification
MATTER NUMBER: 1003-00001
MATTER STATUS: Closed — Terminated
FTC TRANSACTION NUMBER: 2418-7603
This memorandum constitutes the official closing record for the above-referenced matter and is prepared for internal firm purposes in accordance with Calderwood & Harkness LLP's matter management and document retention policies. This document is protected by the attorney-client privilege and the attorney work product doctrine. It is not intended for distribution outside the firm and should not be provided to any third party without prior approval of the Responsible Partner.
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I. EXECUTIVE SUMMARY
Calderwood & Harkness LLP ("C&H" or the "Firm") was retained by Harrowgate Capital Management LLC ("HCM"), a Delaware limited liability company serving as the general partner of Harrowgate Private Equity Fund IV, L.P. ("HPE Fund IV"), in connection with the Hart-Scott-Rodino Act premerger notification filing for HPE Fund IV's proposed acquisition of 100% of the outstanding membership interests of Ridgemark Capital Advisors, LLC ("Ridgemark" or "RCA"). Ridgemark is a Delaware limited liability company and SEC-registered investment adviser (CRD No. 298174) headquartered in Boston, Massachusetts, with approximately $4.7 billion in assets under management as of March 31, 2024. The proposed transaction was structured as a membership interest purchase with a total enterprise value of $370 million and an equity purchase price of $328 million, after deducting approximately $42 million of net funded debt.
The C&H engagement was opened on June 5, 2024, following execution of the engagement letter by Howard Bellamy and Elaine Forsythe on behalf of the Firm and by Gavin Trask, Managing Partner and Chairman of HCM, on behalf of the client. HSR Notification and Report Forms for both the Acquiring Person and the Acquired Person were filed simultaneously on June 18, 2024 with the Federal Trade Commission ("FTC") and the Antitrust Division of the U.S. Department of Justice ("DOJ"). Clearance for the transaction was assigned to the FTC, which acknowledged receipt of the filings on June 21, 2024.
On July 8, 2024, FTC staff issued a voluntary access letter requesting supplemental Item 4(c) and 4(d) documents, to which C&H responded on July 10, 2024 with the production of 23 supplemental documents on behalf of the Acquiring Person. On July 16, 2024 — two days before expiration of the initial 30-day statutory waiting period — the FTC issued a Second Request to both the Acquiring Person and the Acquired Person. The Second Request identified primary competitive concerns relating to (a) horizontal overlaps in sub-advisory services for alternative credit mutual funds and (b) separately managed accounts focused on private credit and distressed debt for U.S. institutional investors, arising from the aggregation of Ridgemark's approximately $1.4 billion alternative credit SMA portfolio with the approximately $2.1 billion alternative credit SMA portfolio of Dunmore Asset Management LLC ("Dunmore"), an existing HPE Fund IV portfolio company acquired in 2023.
While C&H was engaged in preliminary Second Request compliance planning and had conducted an initial in-person meeting with FTC Mergers IV staff on July 22, 2024, the Harrowgate Investment Committee voted on August 26, 2024 to abandon the proposed acquisition. The decision to terminate the transaction was driven primarily by commercial deterioration at Ridgemark, including a 41% decline in Q2 2024 performance fee revenue relative to Q2 2023, the departure of two key portfolio managers from Ridgemark's alternative credit group, and a corresponding compression of the implied EBITDA multiple from approximately 22.0x on a trailing twelve-month basis to approximately 25.5x on a pro forma forward basis. The Membership Interest Purchase Agreement ("MIPA") was formally terminated on August 30, 2024.
On September 3, 2024, C&H submitted an HSR withdrawal notification letter to the FTC Premerger Notification Office on behalf of HCM, formally withdrawing the HSR Notification and Report Form filed on June 18, 2024 and referencing FTC Transaction Number 2418-7603. The withdrawal letter stated that the parties had abandoned the proposed transaction as of August 30, 2024 and that the MIPA had been terminated, and requested written confirmation of withdrawal from the FTC. On September 10, 2024, HPE Fund IV wired the reverse termination fee of $7.4 million (representing 2.0% of the $370 million total enterprise value) to Ridgemark Capital Advisors, LLC in accordance with the termination provisions of the MIPA.
No formal antitrust clearance was obtained in connection with this transaction. The FTC Second Request was never substantially complied with, and compliance work ceased upon the decision to abandon the transaction. No consent order, complaint, or other enforcement action was initiated by the FTC. Total professional fees billed by C&H for the engagement were approximately $487,000. Total disbursements included the $160,000 HSR filing fee, which was passed through to the client. The matter terminated before C&H undertook the substantial document review and compliance work that would have been required to satisfy the Second Request, and the estimated $2.5–$3.8 million in additional outside counsel fees and $800,000–$1.2 million in e-discovery vendor costs that had been projected in C&H's August 14, 2024 compliance timeline memorandum were never incurred.
This memorandum is prepared to memorialize the scope of the engagement, the work performed, the key documents generated and received, the regulatory outcome, and the billing summary, and to serve as the official matter-closing record for Matter No. 1003-00001.
II. IDENTIFICATION OF PARTIES AND KEY PERSONNEL
A. Client
Harrowgate Private Equity Fund IV, L.P. is a Delaware limited partnership with its principal place of business at 1200 North Market Street, Suite 1400, Wilmington, Delaware 19801. HPE Fund IV is a private equity fund focused on middle-market financial services and asset management platform acquisitions. The fund held its final close in December 2023 with total committed capital of approximately $6.2 billion.
Harrowgate Capital Management LLC ("HCM") is a Delaware limited liability company maintaining the same address as HPE Fund IV. HCM serves as the general partner of HPE Fund IV and was identified as the Ultimate Parent Entity ("UPE") for purposes of the HSR premerger notification filing. HCM manages total assets in excess of $23.9 billion across all Harrowgate-affiliated funds and accounts. For purposes of the HSR filing and the related antitrust analysis, HCM's portfolio holdings — including, critically, Dunmore Asset Management LLC — were attributed to the Acquiring Person.
The following individuals served as the primary client contacts for this engagement:
• Gavin Trask — Managing Partner & Chairman, Harrowgate Capital Management LLC. Mr. Trask was the ultimate decision-maker on the client side and the signatory to the engagement letter. He participated in all strategic discussions regarding the antitrust risk assessment, Second Request strategy, and the ultimate decision to abandon the transaction.
• Diane Ochoa — Partner, Head of Financial Services Investments, Harrowgate Capital Management LLC. Ms. Ochoa served as the lead deal partner for the Ridgemark acquisition and was the principal point of contact for substantive communications regarding the HSR filing, Item 4 document collection, and the FTC meeting held on July 22, 2024. Ms. Ochoa attended the FTC meeting in person.
• Marcus Hale — Vice President, Deal Execution, Harrowgate Capital Management LLC. Mr. Hale was responsible for coordinating document collection across HCM, Dunmore, and Greycastle Partners LLC in response to C&H's Item 4(c) and 4(d) collection memorandum and was the day-to-day liaison for transactional logistics.
B. Target
Ridgemark Capital Advisors, LLC ("Ridgemark" or "RCA") is a Delaware limited liability company and an SEC-registered investment adviser bearing CRD No. 298174. Ridgemark maintains its headquarters at 600 Boylston Street, Suite 3200, Boston, Massachusetts 02116.
As of March 31, 2024, Ridgemark reported approximately $4.7 billion in assets under management. Its trailing twelve-month revenue through Q1 2024 was $58.3 million, comprised of $51.1 million in management fees and $7.2 million in performance/incentive fees. Trailing twelve-month EBITDA through Q1 2024 was $16.8 million. The company employed approximately 112 individuals.
Ridgemark's business lines encompass three principal activities:
1. Separately Managed Accounts (SMAs) for Institutional Investors. Ridgemark manages SMAs on behalf of pension funds, endowments, foundations, and insurance companies, with a particular concentration in alternative credit strategies. As of March 31, 2024, Ridgemark's alternative credit SMA assets totaled approximately $1.4 billion.
2. Alternative Credit Strategies. Ridgemark's alternative credit platform encompasses private credit origination, structured credit (CLO equity and mezzanine), and distressed debt investing. These strategies are offered across both SMA and commingled fund vehicles.
3. Sub-Advisory Services for Mutual Fund Complexes. Ridgemark provides sub-advisory services to several mutual fund sponsors, managing alternative credit sleeves within larger multi-strategy mutual fund products.
The applicable NAICS codes for Ridgemark's business are 523920 (Portfolio Management) and 523910 (Miscellaneous Intermediation). Ridgemark's balance sheet reflected total assets of approximately $87 million, excluding client AUM.
The pre-transaction equity ownership of Ridgemark was held as follows:
• Jonathan Kessler, Founder & CEO — 38% equity interest
• Priya Narayanan, COO — 12% equity interest
• Other employee partners — 20% equity interest (collectively)
• Thornfield Growth Partners, LLC (selling financial sponsor) — 30% equity interest
Under the terms of the MIPA, Mr. Kessler and Ms. Narayanan were each to retain rollover equity of approximately 10% of the post-closing entity, with the balance of their equity interests to be paid in cash. Thornfield Growth Partners, LLC sought a full cash exit, with anticipated cash proceeds of approximately $98.4 million (30% of the $328 million equity purchase price, subject to customary purchase price adjustments).
C. Selling Sponsor
Thornfield Growth Partners, LLC is a Delaware limited liability company with its principal office at 399 Park Avenue, 28th Floor, New York, New York 10022. Thornfield is a growth equity firm focused on financial services and technology-enabled business services, and it held a 30% equity stake in Ridgemark at the time of the proposed transaction. Thornfield's primary contact for the transaction was Sandra Wellman, Partner. Thornfield's anticipated cash proceeds upon consummation of the acquisition were approximately $98.4 million, representing 30% of the $328 million equity purchase price, subject to working capital and other customary purchase price adjustments under the MIPA.
D. Related Portfolio Company (Source of Competitive Overlap)
Dunmore Asset Management LLC ("Dunmore") is a Delaware limited liability company and SEC-registered investment adviser headquartered at 227 West Monroe Street, Suite 4100, Chicago, Illinois 60606. Dunmore is led by Franklin Broussard, Chief Executive Officer.
Dunmore is an existing HPE Fund IV portfolio company, having been acquired by HPE Fund IV in 2023. As of the date of the Ridgemark transaction analysis, Dunmore managed total assets under management of approximately $3.9 billion, of which approximately $2.1 billion was attributable to alternative credit separately managed accounts. Dunmore's applicable NAICS code is 523920 (Portfolio Management).
The competitive overlap between Dunmore and Ridgemark in the alternative credit SMA and sub-advisory spaces was the central antitrust concern identified by C&H's risk assessment and subsequently confirmed as the basis for the FTC's issuance of the Second Request. The combination of Dunmore's approximately $2.1 billion in alternative credit SMAs with Ridgemark's approximately $1.4 billion in alternative credit SMAs yielded a combined estimated market share of approximately 14%–18% under a narrow market definition for alternative credit SMA services for U.S. institutional clients, depending on the geographic and product scope assumptions employed.
E. Calderwood & Harkness LLP Engagement Team
The following attorneys constituted the C&H engagement team for this matter:
• Howard Bellamy — Responsible Partner, Antitrust & Competition Group. Mr. Bellamy supervised all aspects of the engagement, served as the lead partner on all communications with the FTC, attended the July 22, 2024 in-person meeting with FTC Mergers IV staff, and signed the HSR filing transmittal letter and the HSR withdrawal notification letter.
• Elaine Forsythe — Billing Partner, Antitrust & Competition Group. Ms. Forsythe served as the billing partner for the engagement, co-signed the engagement letter, reviewed and approved all invoices, and oversaw compliance with the voluntary fee cap arrangement.
• Elliot Nguyen — Lead Associate, Antitrust & Competition Group. Mr. Nguyen served as the principal working attorney on the engagement, responsible for preparing the HSR Notification and Report Form, coordinating Item 4 document collection and production, drafting the antitrust risk assessment memorandum and the Second Request strategy memorandum, conducting the competitive overlap analysis, and preparing this matter closing memorandum.
• Aaron Liu — Working Associate, Antitrust & Competition Group. Mr. Liu provided support on Item 4 document review, assisted in the preparation of the FTC meeting preparation memorandum dated July 19, 2024, and participated in Second Request scope analysis and compliance planning.
F. Counterparty Counsel
Target's Counsel:
Blackwell, Oakes & Hardin LLP ("BOH") 125 High Street, Suite 2800 Boston, Massachusetts 02110
• Catherine Oakes — Lead M&A Partner. Ms. Oakes served as lead transaction counsel for Ridgemark and was the principal counterparty contact for all matters relating to the MIPA, the termination process, and the reverse termination fee.
• Rajesh Subramaniam — Antitrust Partner. Mr. Subramaniam handled HSR filing coordination on behalf of the Acquired Person, attended the July 22, 2024 FTC meeting on behalf of Ridgemark, and liaised with C&H regarding Second Request compliance on the target side.
Selling Sponsor's Counsel:
Lyle & Pennington LLP ("L&P") 51 West 52nd Street New York, New York 10019
• Thomas Pennington III — Lead Partner. Mr. Pennington represented Thornfield Growth Partners, LLC in connection with the transaction and was notified of the MIPA termination through the formal termination notice process.
G. Other Advisors and Third Parties
Client's Financial Advisor:
Greycastle Partners LLC 300 Atlantic Street Stamford, Connecticut 06901
• Mitchell Avery — Managing Director (Lead Banker). Greycastle served as financial advisor to HCM and HPE Fund IV in connection with the proposed acquisition of Ridgemark. Greycastle personnel were identified as custodians in the Item 4(c) and 4(d) document collection process due to their preparation of deal-related strategic materials.
Target's Financial Advisor:
Cairnstone Advisory Group LLC 200 Clarendon Street, Suite 1500 Boston, Massachusetts 02116
• Laura Feng — Managing Director (Lead Banker). Cairnstone served as financial advisor to Ridgemark and the selling equityholders.
Lender:
Meridian National Bank, N.A. 70 Hudson Street Jersey City, New Jersey 07302
• Gerald Statham — Senior Vice President, Sponsor Finance. Meridian National Bank provided a $280 million senior secured credit facility commitment letter dated June 3, 2024 to finance the proposed acquisition. C&H did not represent Meridian and had no direct engagement with Meridian's counsel in connection with this matter. The commitment letter was provided to C&H by the client for reference purposes and is maintained in the client file as a client-provided document.
Client's Auditor:
Pallister & Greaves Bramwell CPAs LLP 2001 Market Street Philadelphia, Pennsylvania 19103
Target's Auditor:
Ashfield, Stroval & Co. LLP One Post Office Square, Suite 3600 Boston, Massachusetts 02109
Regulatory Agency:
Federal Trade Commission Bureau of Competition, Mergers IV Division Washington, D.C.
FTC Transaction Number: 2418-7603
The transaction was initially filed with both the FTC and the Antitrust Division of the DOJ. Clearance was assigned to the FTC, which handled all substantive review through its Bureau of Competition, Mergers IV Division.
III. TRANSACTION SUMMARY
A. Structure and Terms
The proposed transaction was structured as a membership interest acquisition pursuant to the Membership Interest Purchase Agreement ("MIPA"), dated June 4, 2024, among the following parties: Harrowgate Private Equity Fund IV, L.P. (as buyer), Ridgemark Capital Advisors, LLC (as the company), Jonathan Kessler, Priya Narayanan, certain other employee partners of Ridgemark (collectively, as sellers), and Thornfield Growth Partners, LLC (as the selling financial sponsor).
Under the MIPA, HPE Fund IV agreed to acquire 100% of the outstanding membership interests of Ridgemark Capital Advisors, LLC. The key financial terms of the transaction were as follows:
The MIPA provided for the following treatment of equity holders:
• Jonathan Kessler (38% pre-transaction equity) — to retain rollover equity of approximately 10% of the post-closing entity, with the balance of his equity interest to be paid in cash at closing.
• Priya Narayanan (12% pre-transaction equity) — to retain rollover equity of approximately 10% of the post-closing entity, with the balance of her equity interest to be paid in cash at closing.
• Other employee partners (20% pre-transaction equity collectively) — full cash exit at closing.
• Thornfield Growth Partners, LLC (30% pre-transaction equity) — full cash exit at closing, with anticipated cash proceeds of approximately $98.4 million (representing 30% of the $328 million equity purchase price, subject to customary working capital and purchase price adjustment mechanisms).
The MIPA contained customary representations, warranties, covenants, and closing conditions, including a regulatory condition requiring either (a) expiration or early termination of the HSR Act waiting period, or (b) substantial compliance with any Second Request issued in connection with the HSR filing, followed by expiration of the extended waiting period. The MIPA also contained a regulatory outside date of December 31, 2024, after which either party could terminate the agreement if the regulatory condition had not been satisfied.
B. Financing
The acquisition was to be financed through a combination of HPE Fund IV equity capital and third-party debt. Meridian National Bank, N.A. issued a commitment letter dated June 3, 2024 for a $280 million senior secured credit facility to support the transaction. The commitment letter was subject to customary conditions precedent, including the absence of a material adverse effect and the satisfaction of regulatory conditions. The balance of the purchase price was to be funded from HPE Fund IV's available committed capital, supplemented by rollover equity contributions from Mr. Kessler and Ms. Narayanan.
C&H was not engaged to advise on the financing arrangements, and no financing-related work was performed under this engagement. The commitment letter is maintained in the matter file as a client-provided reference document.
C. Reverse Termination Fee Provision
Section 8.03(b) of the MIPA provided for a reverse termination fee of $7.4 million, calculated as 2.0% of the total enterprise value of $370 million. The reverse termination fee was payable by HPE Fund IV to Ridgemark upon termination of the MIPA by the buyer without cause or upon the buyer's failure to consummate the closing when all conditions to closing had been satisfied. In accordance with this provision, HPE Fund IV wired $7.4 million to Ridgemark Capital Advisors, LLC on September 10, 2024, following the formal termination of the MIPA on August 30, 2024. C&H advised the client on the mechanics and timing of the reverse termination fee payment as part of the termination advisory memorandum dated August 27, 2024, but the fee payment itself was handled directly by HCM with its transaction counsel.
IV. SCOPE OF ENGAGEMENT
The scope of C&H's engagement was defined in the engagement letter dated June 5, 2024, executed by Howard Bellamy and Elaine Forsythe on behalf of the Firm and by Gavin Trask on behalf of HCM. The engagement encompassed the following categories of work:
1. HSR Premerger Notification Preparation and Filing. C&H was retained to prepare and file the HSR Notification and Report Form on behalf of HCM, as the Ultimate Parent Entity of the Acquiring Person, in accordance with the requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C. § 18a, and the implementing regulations set forth at 16 C.F.R. Parts 801–803. This included the identification and collection of Item 4(c) and 4(d) documents, the determination of applicable NAICS codes, the calculation of filing fees, and the coordination with target's counsel for simultaneous filing.
2. Antitrust Risk Assessment. C&H was engaged to conduct an independent antitrust risk assessment of the proposed acquisition, including an analysis of competitive overlaps between Ridgemark and Dunmore Asset Management LLC (an existing HPE Fund IV portfolio company), relevant market definition, combined market share estimation, and the likelihood and potential scope of regulatory review by the FTC or DOJ.
3. Second Request Compliance Advisory. In the event of the issuance of a Second Request by the FTC or DOJ, C&H was engaged to advise HCM on compliance strategy, scope negotiation, custodian identification, document review protocols, timeline management, and estimated costs. The engagement letter contemplated that substantial Second Request compliance work — including large-scale document review, interrogatory responses, and e-discovery vendor management — would be governed by standard hourly billing rates if triggered, with the voluntary fee cap applicable only to work through initial clearance.
4. Coordination with FTC Staff. C&H was authorized to communicate directly with FTC and DOJ staff on behalf of HCM in connection with the HSR filing and any subsequent investigation, including responding to voluntary access letters, participating in meetings with agency staff, and presenting advocacy materials in support of clearance.
The engagement did not encompass M&A transaction counsel work (which was handled by the client's separate transaction counsel), financing counsel work, regulatory filings with the SEC or state securities regulators, or investment advisory compliance matters. C&H's role was limited to the antitrust and HSR aspects of the proposed acquisition.
The statutory and regulatory framework governing the engagement included the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (15 U.S.C. § 18a), the Clayton Act (15 U.S.C. § 18), and the FTC's implementing regulations at 16 C.F.R. Parts 801–803, including the 2024 revised filing thresholds and fee schedule.
V. CHRONOLOGICAL SUMMARY OF WORK PERFORMED
The following is a chronological summary of the principal work performed by C&H in connection with Matter No. 1003-00001, organized by phase. All dates, deliverables, and descriptions are based on the Firm's contemporaneous time records, correspondence files, and work product maintained in the document management system under the matter number.
A. Pre-Filing Phase (June 5 – June 17, 2024)
1. June 5, 2024 — Engagement Opened.
The C&H engagement was formally opened upon execution of the engagement letter. The engagement letter was signed by Howard Bellamy and Elaine Forsythe on behalf of the Firm and by Gavin Trask, Managing Partner and Chairman of Harrowgate Capital Management LLC, on behalf of the client. The engagement letter set forth the scope of services, the fee arrangement (including the voluntary fee cap of $650,000 for all work through initial clearance, subject to voiding upon issuance of a Second Request), applicable hourly rates, and standard terms of engagement. A conflict check was completed prior to execution, and no disqualifying conflicts were identified. The matter was opened in the Firm's new matter intake system under Matter No. 1003-00001 and assigned to the Antitrust & Competition Group.
2. June 7, 2024 — Item 4(c) and 4(d) Document Collection Memorandum Transmitted.
Elliot Nguyen prepared and transmitted a detailed memorandum to Marcus Hale and Diane Ochoa at HCM providing instructions for the identification, collection, and initial review of documents responsive to Items 4(c) and 4(d) of the HSR Notification and Report Form. Item 4(c) requires the production of documents prepared by or for officers or directors of the filing person that analyze the proposed transaction with respect to markets, market shares, competition, competitors, potential for sales growth, or expansion into new product or geographic markets. Item 4(d) requires the production of studies, surveys, analyses, and reports prepared by or for officers or directors for the purpose of evaluating or analyzing the proposed transaction with respect to market shares, competition, and related topics.
The memorandum identified key custodians across three entities: (a) Harrowgate Capital Management LLC (Gavin Trask, Diane Ochoa, and Marcus Hale), (b) Dunmore Asset Management LLC (Franklin Broussard), and (c) Greycastle Partners LLC (Mitchell Avery). The memorandum provided detailed guidance on the scope of responsive documents, including investment committee memoranda, board presentations, confidential information memoranda, management presentations, market studies, and financial advisor materials. A review deadline of June 14, 2024 was established to allow sufficient time for C&H review prior to the targeted filing date of June 18, 2024.
3. June 10, 2024 — Antitrust Risk Assessment Memorandum Delivered.
C&H delivered a comprehensive antitrust risk assessment memorandum to Gavin Trask and Diane Ochoa. The memorandum was prepared by Elliot Nguyen under the supervision of Howard Bellamy and contained the following principal analyses:
Competitive Overlap Analysis. The memorandum identified the primary competitive overlap between Ridgemark and Dunmore in the area of separately managed accounts focused on alternative credit strategies (including private credit, structured credit, and distressed debt) for U.S. institutional investors. Ridgemark maintained approximately $1.4 billion in alternative credit SMA assets, and Dunmore maintained approximately $2.1 billion, for a combined total of approximately $3.5 billion. The memorandum also identified a secondary overlap in sub-advisory services for alternative credit mutual fund strategies, though the AUM attributable to this category was smaller and less precisely quantifiable.
Market Definition. The memorandum analyzed multiple potential market definitions, ranging from a narrow definition encompassing only alternative credit SMA services for U.S. institutional clients (pension funds, endowments, foundations, and insurance companies) to a broader definition encompassing all separately managed account services across all asset classes, or all alternative investment advisory services regardless of vehicle type. Under the narrowest plausible market definition, the combined market share of Dunmore and Ridgemark was estimated at approximately 14%–18%, depending on assumptions regarding the total size of the relevant market. Under broader market definitions, the combined share diminished materially to levels unlikely to trigger enforcement action.
Regulatory Risk Assessment. The memorandum concluded that the transaction was likely to receive a Second Request from the reviewing agency, given the non-trivial horizontal overlap under narrow market definitions, the increasing scrutiny of private equity roll-up strategies in the asset management sector, and the FTC's stated enforcement priorities. C&H recommended that the parties not request early termination of the initial HSR waiting period, as such a request was likely to be denied and could signal an expectation of expedited clearance that was not warranted by the competitive profile of the transaction.
Filing Fee Determination. The memorandum confirmed that the applicable HSR filing fee was $160,000, based on the transaction value of $370 million falling within the $173.3 million–$536.4 million band under the 2024 revised fee schedule promulgated by the FTC.
4. June 5–17, 2024 — HSR Form Preparation and Item 4 Document Collection.
During this period, the engagement team — principally Elliot Nguyen and Aaron Liu — prepared the HSR Notification and Report Form for the Acquiring Person and coordinated Item 4 document collection and review. This work included the following activities:
• Identification of the applicable NAICS codes for Ridgemark's business activities: 523920 (Portfolio Management) and 523910 (Miscellaneous Intermediation).
• Determination of the Ultimate Parent Entity filing structure, with HCM identified as the UPE for the Acquiring Person.
• Compilation of revenue data by NAICS code for HCM-controlled entities (including Dunmore).
• Review of Item 4(c) and 4(d) documents collected from HCM, Dunmore, and Greycastle custodians to identify responsive materials for inclusion with the filing.
• Preparation of the Certification required under 16 C.F.R. § 803.5.
• Coordination with Rajesh Subramaniam of BOH regarding the Acquired Person's filing and simultaneous filing logistics.
5. June 15, 2024 — Draft HSR Form Circulated to Client.
A draft HSR Notification and Report Form for the Acquiring Person was circulated by Elliot Nguyen to Diane Ochoa and Marcus Hale for client review and comment. The draft form identified Harrowgate Capital Management LLC as the Ultimate Parent Entity, referenced the MIPA dated June 4, 2024 as the definitive transaction agreement, and contained the completed Item 4(c) and 4(d) document production. Comments were received from Ms. Ochoa on June 17, 2024, and the form was finalized for filing.
B. Filing and Initial Waiting Period (June 18 – July 15, 2024)
6. June 18, 2024 — HSR Notification and Report Forms Filed.
The HSR Notification and Report Forms were filed simultaneously for both the Acquiring Person (Harrowgate Capital Management LLC, as UPE) and the Acquired Person (Ridgemark Capital Advisors, LLC). The filings were submitted to the Premerger Notification Office of the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice. A transmittal letter signed by Howard Bellamy accompanied the filing and enclosed the executed certification and the Item 4(c) and 4(d) document production. The HSR filing fee of $160,000 was wired by HCM to the FTC on the date of filing.
The filings were submitted based on the following threshold determinations:
• Size-of-Transaction Test (2024 thresholds): The transaction value of $370 million exceeded the $119.5 million reporting threshold, satisfying the size-of-transaction test. Filing was required.
• Size-of-Persons Test: HCM reported total assets in excess of $23.9 billion across all Harrowgate-affiliated funds and accounts, satisfying the requirement that the acquirer have total assets or annual net sales exceeding $239 million. Ridgemark reported total assets of approximately $87 million (excluding client AUM held in a fiduciary capacity), satisfying the requirement that the acquired person have total assets or annual net sales exceeding $23.9 million. The size-of-persons test was satisfied.
• Early Termination: Not requested. Consistent with the recommendation in C&H's June 10, 2024 risk assessment memorandum, the parties elected not to request early termination of the initial 30-day waiting period, given the anticipated likelihood of a Second Request.
7. June 21, 2024 — FTC Acknowledgment of Receipt.
The FTC acknowledged receipt of the HSR filings and assigned clearance for the transaction to the FTC rather than the DOJ. The FTC Transaction Number assigned to the matter was 2418-7603. The assignment of clearance to the FTC was consistent with the agency's longstanding practice of reviewing transactions in the financial services and asset management sectors.
8. July 8, 2024 — FTC Voluntary Access Letter.
Prior to the expiration of the initial 30-day waiting period, FTC staff issued a voluntary access letter to C&H requesting additional documents responsive to Items 4(c) and 4(d) of the HSR Notification and Report Form. The voluntary access letter identified several categories of supplemental documents that the FTC believed had not been included in the initial production, including certain Harrowgate Investment Committee presentations and internal Dunmore strategy documents relating to the alternative credit SMA market.
9. July 10, 2024 — Supplemental Item 4 Production.
In response to the FTC's voluntary access letter, C&H produced 23 supplemental documents on behalf of the Acquiring Person. A cover letter was transmitted by Elliot Nguyen to the FTC Bureau of Competition, Mergers IV Division, referencing FTC Transaction Number 2418-7603 and noting that the production was made voluntarily and without waiver of any privileges or objections. The supplemental documents included internal Harrowgate Investment Committee memoranda, Dunmore strategy presentations, and Greycastle-prepared market analysis materials that had been identified through an expanded custodian search following receipt of the voluntary access letter.
C. Second Request Phase (July 16 – August 30, 2024)
10. July 16, 2024 — FTC Second Request Issued.
On July 16, 2024 — two days before the scheduled expiration of the initial 30-day waiting period — the FTC issued a Second Request to both the Acquiring Person and the Acquired Person, pursuant to 15 U.S.C. § 18a(e)(1)(A). The Second Request was issued by the FTC Bureau of Competition, Mergers IV Division.
The Second Request identified the following primary competitive concerns:
(a) Horizontal overlap in sub-advisory services for alternative credit mutual funds. The FTC identified competitive overlap between Ridgemark's sub-advisory business and Dunmore's sub-advisory services in the provision of alternative credit strategy management to mutual fund complexes. The FTC expressed concern that the acquisition would consolidate two significant providers of these sub-advisory services, potentially reducing competition for mutual fund sponsors seeking alternative credit sub-advisers.
(b) Separately managed accounts focused on private credit and distressed debt for U.S. institutional investors. The FTC identified competitive overlap between Ridgemark's approximately $1.4 billion in alternative credit SMAs and Dunmore's approximately $2.1 billion in alternative credit SMAs, focusing on accounts maintained on behalf of pension funds, endowments, and insurance companies. FTC staff estimated the combined share of the alternative credit SMA market at approximately 14%–18% under a narrow market definition that aggregated the two firms' alternative credit SMA portfolios.
The Second Request contained detailed specifications and interrogatories requiring the production of voluminous categories of documents and data, including all documents relating to competitive dynamics in the alternative credit SMA and sub-advisory markets, customer correspondence, pricing analyses, win/loss data, and economic analyses of market definition and competitive effects.
11. July 18, 2024 — Initial 30-Day Waiting Period Expired.
The initial 30-day statutory waiting period under the HSR Act expired on July 18, 2024. However, the issuance of the Second Request on July 16, 2024 tolled the waiting period, and the transaction could not be consummated until 30 days following the Acquiring Person's certification of substantial compliance with the Second Request (or such shorter period as the FTC might specify). The expiration of the initial waiting period was therefore moot for purposes of the transaction timeline.
12. July 19, 2024 — Second Request Strategy Memorandum Delivered.
C&H delivered a comprehensive Second Request initial analysis and recommended compliance strategy memorandum to Gavin Trask and Diane Ochoa. The memorandum was prepared by Elliot Nguyen and reviewed by Howard Bellamy. Its contents included the following:
• A detailed analysis of each specification and interrogatory in the Second Request, organized by topic area.
• An assessment of the scope and volume of documents likely to be responsive, including preliminary estimates of the document universe across potential custodians.
• A recommended compliance workflow, including custodian identification, document hold procedures, search term development, Technology Assisted Review ("TAR") protocols, and production formatting standards.
• A discussion of potential scope limitation negotiations to be raised at the upcoming FTC meeting, including proposed limitations on custodian lists, date ranges, and document categories.
• An analysis of the effect of the Second Request on the MIPA's regulatory condition and outside date, including an assessment of whether substantial compliance could reasonably be achieved prior to the December 31, 2024 regulatory outside date.
• A note that the issuance of the Second Request voided the $650,000 voluntary fee cap set forth in the engagement letter, with billing for all subsequent work reverting to standard hourly rates.
13. July 19, 2024 — FTC Meeting Preparation Memorandum.
Aaron Liu prepared, and Howard Bellamy and Elliot Nguyen reviewed, an internal memorandum setting forth talking points and strategy for the upcoming in-person meeting with FTC Mergers IV staff. The memorandum addressed the following topics:
• Distinct competitive characteristics of Dunmore vs. Ridgemark. The memorandum identified key factual differences between the two firms' alternative credit strategies, including differences in investment focus (Dunmore's greater emphasis on structured credit vs. Ridgemark's greater emphasis on distressed debt), client base composition, geographic coverage, and historical performance characteristics. These distinctions were intended to support an argument that the two firms were not close competitors despite operating in the same broad asset class.
• Arguments for a broader relevant market definition. The memorandum outlined arguments that the relevant market should be defined more broadly than alternative credit SMAs for U.S. institutional investors, potentially encompassing all alternative investment advisory services or all SMA services across asset classes. Under broader market definitions, the combined market share would fall well below the 14%–18% range estimated by FTC staff and would not approach levels that would support a presumption of anticompetitive effects.
• Proposed limitations on Second Request scope. The memorandum proposed specific limitations on the number of custodians, date ranges for document searches, and categories of documents to be produced, with the objective of reducing compliance costs and timeline while still providing the FTC with sufficient information to evaluate the competitive implications of the transaction.
• Potential behavioral remedy framework. The memorandum discussed the possibility of proposing a behavioral remedy — such as information barrier commitments or client consent/portability mechanisms — as an alternative to divestiture, should the FTC identify actionable competitive concerns.
14. July 22, 2024 — In-Person Meeting with FTC Mergers IV Staff.
An in-person meeting was held at the FTC's offices with staff from the Bureau of Competition, Mergers IV Division. The C&H attendees were Howard Bellamy and Elliot Nguyen. Diane Ochoa attended on behalf of HCM. Rajesh Subramaniam of Blackwell, Oakes & Hardin LLP attended on behalf of Ridgemark as the acquired person. The meeting addressed the FTC's competitive concerns, the parties' arguments regarding market definition and competitive dynamics, and potential scope limitations for the Second Request compliance process. C&H's detailed notes of the meeting are maintained in the privileged work product file for the matter.
15. August 5, 2024 — Harrowgate Investment Committee Meeting.
The Harrowgate Investment Committee convened a meeting on August 5, 2024 at which significant concerns were raised regarding the commercial trajectory of the Ridgemark acquisition. C&H was not present at this meeting but was informed of its contents through subsequent communications with Diane Ochoa and Gavin Trask. The key concerns flagged at the meeting included the following:
• Performance Fee Revenue Decline. Ridgemark's Q2 2024 performance fee revenue declined 41% compared to Q2 2023, falling from $3.05 million to $1.8 million. This decline reflected poor relative performance in several of Ridgemark's alternative credit strategies during the second quarter, driven in part by widening credit spreads and mark-to-market losses in the distressed debt portfolio.
• Key Personnel Departures. Two senior portfolio managers in Ridgemark's alternative credit group had given notice of their intent to depart the firm. These departures threatened to reduce the firm's investment management capacity in its core revenue-generating business line and raised concerns about the stability of the investment team post-closing.
• Revised Revenue and EBITDA Projections. In light of the performance fee decline and personnel departures, Harrowgate's deal team revised Ridgemark's annualized revenue run-rate downward to approximately $52.6 million, compared to the $58.3 million trailing twelve-month revenue figure that had formed the basis of the original transaction valuation. Forward EBITDA was estimated at approximately $14.5 million, compressing the implied EBITDA multiple from approximately 22.0x (on a TTM basis) to approximately 25.5x on a pro forma forward basis.
16. August 14, 2024 — Second Request Compliance Timeline and Cost Estimate Memorandum.
C&H delivered a Second Request compliance timeline and cost estimate memorandum to Gavin Trask and Diane Ochoa. The memorandum was prepared by Elliot Nguyen and reviewed by Howard Bellamy and Elaine Forsythe. The memorandum provided the following key estimates and analysis:
• Custodians. The memorandum estimated that 12–15 custodians would need to be searched across Harrowgate Capital Management LLC, Dunmore Asset Management LLC, and Greycastle Partners LLC, based on C&H's analysis of the Second Request specifications and the results of the July 22, 2024 FTC meeting.
• Document Universe. The estimated document universe was approximately 350,000–500,000 documents, based on preliminary data collection and sampling from custodian email archives and shared drives.
• Review Timeline. The projected review timeline was 10–14 weeks from formal commencement of review, assuming deployment of a TAR-assisted review workflow with a review team of approximately 20–30 contract attorneys supervised by C&H associates.
• Estimated Outside Counsel Fees. C&H estimated that the outside counsel fees for Second Request compliance would range from $2.5 million to $3.8 million, inclusive of attorney time for document review supervision, interrogatory drafting, economic expert coordination, and continued FTC advocacy.
• Estimated E-discovery Vendor Costs. E-discovery vendor costs (including data processing, hosting, TAR platform licensing, and production formatting) were estimated at $800,000–$1.2 million.
• Current Fee Status. The memorandum noted that total C&H fees billed to date were approximately $487,000, and that the voluntary fee cap had been voided upon issuance of the Second Request.
• Commercial Impact Assessment. The memorandum flagged the revised implied EBITDA multiple of approximately 25.5x on a pro forma basis ($370 million ÷ estimated $14.5 million forward EBITDA), noting that this level of compression in the commercial rationale for the acquisition warranted consideration by the Harrowgate Investment Committee in evaluating whether to proceed with Second Request compliance.
17. August 26, 2024 — Investment Committee Decision to Abandon Transaction.
The Harrowgate Investment Committee voted to abandon the proposed acquisition of Ridgemark Capital Advisors, LLC, citing the deterioration in Ridgemark's commercial performance and revised financial projections described above. The committee concluded that the combination of declining performance fee revenue, key personnel departures, compressed implied valuation multiples, and the anticipated cost and timeline of Second Request compliance no longer supported proceeding with the transaction. C&H was notified of the decision on August 26, 2024 by Gavin Trask.
D. Transaction Abandonment and Matter Closing (August 27 – September 12, 2024)
18. August 27, 2024 — Termination Advisory Memorandum Delivered.
Upon notification of the Investment Committee's decision, C&H promptly delivered a termination advisory memorandum to Gavin Trask and Diane Ochoa. The memorandum was prepared by Elliot Nguyen under the supervision of Howard Bellamy and addressed the following matters:
• MIPA Termination Mechanics. The memorandum analyzed the buyer's termination right under the MIPA, identifying the applicable termination provision and the procedural requirements for delivering a valid termination notice to Ridgemark, Thornfield Growth Partners, their respective counsel (Blackwell, Oakes & Hardin LLP and Lyle & Pennington LLP), and any other required notice recipients.
• Reverse Termination Fee. The memorandum confirmed that the reverse termination fee of $7.4 million (2.0% × $370 million total enterprise value) would become payable by HPE Fund IV to Ridgemark upon the buyer's exercise of its termination right without cause. The memorandum advised on the timing and mechanics of the fee payment, including wire transfer instructions and documentation.
• HSR Withdrawal Procedure. The memorandum outlined the procedure for withdrawing the HSR Notification and Report Form, citing 16 C.F.R. § 803.7. Under this regulation, a filing person may withdraw its notification at any time prior to the expiration of the applicable waiting period (including any extended waiting period following a Second Request). The memorandum recommended that the withdrawal letter be submitted promptly following execution of the MIPA termination notice, and that the letter reference the FTC Transaction Number and state that the parties had abandoned the proposed transaction.
• Surviving Obligations. The memorandum addressed surviving confidentiality obligations under the MIPA and any non-disclosure agreements between the parties, including obligations relating to the return or destruction of Ridgemark's confidential information. The memorandum also addressed the treatment and disposition of Second Request materials, including partial compliance work product and draft interrogatory responses, recommending that all such materials be retained in accordance with C&H's document retention policy and applicable bar rules.
19. August 30, 2024 — MIPA Terminated.
The MIPA was formally terminated on August 30, 2024. The termination was effective upon delivery of the buyer's termination notice in accordance with the notice provisions of the MIPA. Notice was delivered to Ridgemark Capital Advisors, LLC, Jonathan Kessler, Priya Narayanan, Thornfield Growth Partners, LLC, Blackwell, Oakes & Hardin LLP (Catherine Oakes and Rajesh Subramaniam), and Lyle & Pennington LLP (Thomas Pennington III). The matter was considered closed from a transactional standpoint as of this date.
20. September 3, 2024 — HSR Withdrawal Notification Letter Filed.
Howard Bellamy, on behalf of HCM, transmitted an HSR withdrawal notification letter to the FTC Premerger Notification Office. The letter formally withdrew the HSR Notification and Report Form filed on June 18, 2024 on behalf of Harrowgate Capital Management LLC as the Ultimate Parent Entity of the Acquiring Person. The letter referenced FTC Transaction Number 2418-7603 and stated that the parties had abandoned the proposed transaction as of August 30, 2024 and that the MIPA had been terminated. The letter requested written confirmation of the withdrawal from the FTC, in accordance with the procedures set forth at 15 U.S.C. § 18a and 16 C.F.R. § 803.7. As of the date of this memorandum, written confirmation of the withdrawal from the FTC is pending.
21. September 10, 2024 — Reverse Termination Fee Payment.
HPE Fund IV wired the reverse termination fee of $7.4 million to Ridgemark Capital Advisors, LLC. The wire transfer was processed through HCM's custodian bank in accordance with the wire instructions provided by Ridgemark's counsel. C&H was informed of the payment by Marcus Hale on the date of transfer. No further financial obligations of HPE Fund IV to Ridgemark or any other transaction party remain outstanding.
VI. REGULATORY OUTCOME
The regulatory outcome of this matter is summarized as follows:
1. No formal antitrust clearance was obtained. The proposed acquisition of Ridgemark Capital Advisors, LLC by Harrowgate Private Equity Fund IV, L.P. was never cleared by the Federal Trade Commission or the Department of Justice. The initial 30-day waiting period under the HSR Act was tolled by the issuance of the Second Request on July 16, 2024, and the extended waiting period never commenced because the Acquiring Person did not certify substantial compliance with the Second Request prior to the abandonment of the transaction.
2. The FTC Second Request was never substantially complied with. Upon the Harrowgate Investment Committee's decision to abandon the transaction on August 26, 2024, all Second Request compliance work ceased. C&H had engaged in preliminary compliance planning, including custodian identification, scope analysis, and preparation of a compliance timeline and cost estimate, but had not commenced large-scale document collection, review, or production. No certification of substantial compliance was filed.
3. The HSR notification was formally withdrawn. On September 3, 2024, C&H submitted an HSR withdrawal notification letter to the FTC Premerger Notification Office on behalf of HCM, formally withdrawing the HSR Notification and Report Form filed on June 18, 2024 and citing the abandonment of the proposed transaction and termination of the MIPA. Written confirmation of the withdrawal from the FTC is pending as of the date of this memorandum.
4. No enforcement action was initiated. The FTC did not initiate any consent order, complaint, preliminary injunction action, or other enforcement proceeding in connection with this transaction. No civil investigative demands were issued beyond the Second Request. There are no outstanding obligations to the FTC or DOJ arising from this matter, other than the pending confirmation of the withdrawal.