1003-00001 · Harrowgate Capital Management LLC · Memos & Analysis

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PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT

MEMORANDUM

TO: Gavin Trask, Managing Partner & Chairman, Harrowgate Capital Management LLC Diane Ochoa, Partner & Head of Financial Services Investments, Harrowgate Capital Management LLC

FROM: Howard Bellamy, Partner, Antitrust & Competition Group, Calderwood & Harkness LLP Elliot Nguyen, Associate, Antitrust & Competition Group, Calderwood & Harkness LLP

DATE: June 10, 2024

RE: Antitrust Risk Assessment — Proposed Acquisition of Ridgemark Capital Advisors, LLC by Harrowgate Private Equity Fund IV, L.P.

C&H Matter No.: 1003-00001

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I. Executive Summary

Calderwood & Harkness LLP ("C&H" or the "Firm") has been retained by Harrowgate Capital Management LLC ("HCM"), in its capacity as general partner of Harrowgate Private Equity Fund IV, L.P. ("HPE Fund IV"), to provide antitrust counsel in connection with HPE Fund IV's proposed acquisition of 100% of the outstanding membership interests of Ridgemark Capital Advisors, LLC ("Ridgemark" or "RCA"). This memorandum sets forth our preliminary assessment of the antitrust risks associated with the proposed transaction, our analysis of applicable filing requirements under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and our recommended course of action with respect to timing, filing strategy, and preparation for potential agency engagement.

The proposed transaction is governed by that certain Membership Interest Purchase Agreement dated June 4, 2024 (the "MIPA"), among HPE Fund IV, as buyer, Ridgemark Capital Advisors, LLC, Jonathan Kessler, Priya Narayanan, other employee partners of Ridgemark, and Thornfield Growth Partners, LLC, as sellers. The total enterprise value of the transaction is $370 million, with an equity purchase price of $328 million after deduction of approximately $42 million in net funded debt.

Based on our analysis, the transaction requires a filing under the HSR Act (15 U.S.C. § 18a; 16 C.F.R. Parts 801–803), as both the size-of-transaction and size-of-persons thresholds are exceeded. The applicable filing fee under the 2024 fee schedule is $160,000.

The principal antitrust concern arising from the proposed transaction stems from the horizontal competitive overlap between Ridgemark and Dunmore Asset Management LLC ("Dunmore"), an existing HPE Fund IV portfolio company acquired in 2023. Both Ridgemark and Dunmore operate in the alternative credit separately managed accounts ("SMA") space and provide sub-advisory services for alternative credit mutual funds. Following consummation of the proposed transaction, both firms would be under common ownership within the HPE Fund IV portfolio.

Under a narrow market definition for alternative credit SMAs serving U.S. institutional clients — the narrowest plausible product market definition that the Federal Trade Commission ("FTC") might adopt — the combined estimated market share of Dunmore and Ridgemark is approximately 14%–18%, depending on assumptions regarding the total addressable market. Under a broader market definition encompassing all credit-focused SMAs and alternative investment strategies, the combined share would be substantially lower, likely well below 10%.

Our assessment is that there is a meaningful probability — which we estimate at approximately 40%–60% — that the FTC will issue a Request for Additional Information and Documentary Material (a "Second Request") pursuant to Section 7A(e) of the HSR Act. We accordingly recommend against requesting early termination of the initial 30-day HSR waiting period, as such a request is unlikely to be granted under the circumstances and could invite accelerated scrutiny from FTC staff.

Notwithstanding the risk of a Second Request, we assess the overall antitrust risk of a formal challenge or enforcement action by the FTC as low-to-moderate. The combined market shares under the narrowest plausible market definition remain below the levels at which courts have historically found a presumption of competitive harm, and the market is characterized by numerous competitors, differentiated strategies, and moderate entry barriers. We believe the transaction is ultimately clearable, though the path to clearance may involve additional time and expense associated with responding to a Second Request and engaging with FTC Mergers Division staff.

The balance of this memorandum provides a detailed analysis supporting these conclusions and sets forth our recommended next steps.

II. Transaction Overview

A. Parties to the Transaction

Acquiring Person. The acquiring person for HSR Act purposes is Harrowgate Capital Management LLC ("HCM"), a Delaware limited liability company, in its capacity as the general partner and Ultimate Parent Entity ("UPE") of Harrowgate Private Equity Fund IV, L.P. ("HPE Fund IV"), a Delaware limited partnership. HCM is headquartered at 1200 North Market Street, Suite 1400, Wilmington, Delaware 19801. HCM serves as the general partner and investment manager for each of the Harrowgate private equity funds and exercises ultimate investment decision-making authority over the portfolio investments of HPE Fund IV.

HPE Fund IV is a private equity fund that held its final close in December 2023 with total committed capital of approximately $6.2 billion. The fund's investment strategy is focused on middle-market financial services and asset management platform acquisitions, with a particular emphasis on scalable fee-based businesses with durable revenue streams. HPE Fund IV has completed three prior platform acquisitions since its formation, including the acquisition of Dunmore Asset Management LLC in 2023.

The key principals involved in the proposed transaction on the Harrowgate side include: Gavin Trask, Managing Partner & Chairman of HCM; Diane Ochoa, Partner and Head of Financial Services Investments at HCM; and Marcus Hale, Vice President, Deal Execution, who serves as the day-to-day deal lead for the Ridgemark acquisition.

Target / Acquired Person. The acquired person is Ridgemark Capital Advisors, LLC ("Ridgemark" or "RCA"), a Delaware limited liability company headquartered at 600 Boylston Street, Suite 3200, Boston, Massachusetts 02116. Ridgemark is a registered investment adviser with the U.S. Securities and Exchange Commission ("SEC") under the Investment Advisers Act of 1940, as amended, and is registered with the Financial Industry Regulatory Authority ("FINRA") under CRD Number 298174.

As of March 31, 2024, Ridgemark reported total assets under management ("AUM") of approximately $4.7 billion across all strategies and client types. For the trailing twelve-month ("TTM") period ended March 31, 2024, Ridgemark generated total revenue of approximately $58.3 million, consisting of management fees of approximately $51.1 million and performance and incentive fees of approximately $7.2 million. TTM EBITDA for the same period was approximately $16.8 million. Ridgemark employs approximately 112 individuals, including approximately 24 investment professionals across its portfolio management and research teams.

Ridgemark's principal business lines include: (i) separately managed accounts for institutional investors, including pension funds, endowments, foundations, and insurance companies; (ii) alternative credit strategies, encompassing private credit, structured credit, and distressed debt; and (iii) sub-advisory services provided to mutual fund complexes for funds with alternative credit mandates. Ridgemark has cultivated a reputation among institutional investors as a specialized manager in the alternative credit space, with a particular emphasis on structured credit and distressed opportunities.

The current ownership of Ridgemark is as follows: Jonathan Kessler, Founder and Chief Executive Officer, holds approximately 38% of the outstanding membership interests; Priya Narayanan, Chief Operating Officer, holds approximately 12%; other employee partners collectively hold approximately 20%; and Thornfield Growth Partners, LLC holds the remaining approximately 30%. Ms. Narayanan has served as COO since 2019 and oversees the firm's operations, compliance infrastructure, and client services functions.

Selling Sponsor. Thornfield Growth Partners, LLC ("Thornfield"), a Delaware limited liability company headquartered at 399 Park Avenue, 28th Floor, New York, New York 10022, is the current 30% minority investor in Ridgemark and is seeking a full cash exit in connection with the proposed transaction. Thornfield's estimated proceeds from the transaction are approximately $98.4 million, calculated as 30% of the $328 million equity purchase price, subject to customary post-closing adjustments as provided in the MIPA. Thornfield is represented by Lyle & Pennington LLP, with Thomas Pennington III serving as Lead Partner.

Rollover Participants. Pursuant to the terms of the MIPA, Jonathan Kessler and Priya Narayanan have each agreed to retain rollover equity interests in the post-closing entity. Mr. Kessler will retain approximately 10% of the equity of the post-closing entity, and Ms. Narayanan will retain approximately 10%, in each case subject to the terms and conditions of the rollover agreements to be executed at closing. The inclusion of rollover equity from the firm's two most senior executives is consistent with HPE Fund IV's investment strategy of incentivizing management alignment and continuity in portfolio company acquisitions.

B. Transaction Structure and Valuation

The proposed transaction is structured as an acquisition of 100% of the outstanding membership interests of Ridgemark Capital Advisors, LLC by HPE Fund IV. Following the closing, Ridgemark will become a wholly-owned subsidiary of HPE Fund IV (subject to the management rollover arrangements described above) and will operate alongside Dunmore Asset Management LLC as a separate portfolio company within the HPE Fund IV portfolio.

The key valuation and financial parameters of the transaction are as follows:

The acquisition will be financed through a combination of HPE Fund IV equity capital and third-party debt. Meridian National Bank, N.A. has provided a commitment letter dated June 3, 2024, for a $280 million senior secured credit facility to support the transaction. The commitment letter was executed by Gerald Statham, Senior Vice President, Sponsor Finance, at Meridian National Bank, and is subject to customary conditions precedent to funding, including satisfactory completion of due diligence and execution of definitive credit documentation.

The transaction was originated and advised on by two financial advisory firms. Greycastle Partners LLC acted as financial advisor to HCM and HPE Fund IV, with Mitchell Avery, Managing Director, serving as the lead advisor. Cairnstone Advisory Group LLC acted as financial advisor to Ridgemark, with Laura Feng, Managing Director, serving as the lead advisor. Ridgemark's legal counsel for the transaction is Blackwell, Oakes & Hardin LLP, with Catherine Oakes serving as Lead M&A Partner and Rajesh Subramaniam serving as Antitrust Partner.

The implied EBITDA multiple of approximately 22.0x is at the upper end of recent comparable transactions in the alternative asset management space, reflecting the premium value that Harrowgate attributes to Ridgemark's institutional client relationships, differentiated alternative credit capabilities, and the anticipated synergies with Dunmore's existing platform. We note that Item 4(c) and 4(d) documents may contain internal valuation analyses and synergy assumptions that reference competitive overlap between Dunmore and Ridgemark, and we address the implications of such documents in Section VIII below.

III. HSR Filing Requirements

A. Applicability of the HSR Act

The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, 15 U.S.C. § 18a, and its implementing regulations at 16 C.F.R. Parts 801–803, require that parties to certain mergers, acquisitions, and transfers of assets or voting securities file premerger notification with the FTC and the Antitrust Division of the U.S. Department of Justice ("DOJ") and observe a mandatory waiting period before consummating the transaction.

The proposed acquisition constitutes an "acquisition" of "voting securities" within the meaning of the HSR Act and its implementing regulations. Although Ridgemark is organized as a limited liability company and its equity is denominated as "membership interests" rather than "shares" or "stock," the FTC's rules treat interests in limited liability companies that confer voting rights and a right to the profits or assets of the entity upon dissolution as "voting securities" for purposes of the HSR Act. See 16 C.F.R. § 801.1(f)(1). Ridgemark's membership interests carry both voting and economic rights, and accordingly are treated as voting securities under the HSR Act.

Because the proposed transaction meets the notification thresholds described below, premerger notification filings are required by both the Acquiring Person (HCM, as UPE) and the Acquired Person (Ridgemark), and a mandatory waiting period must be observed before the transaction can be consummated.

B. Size-of-Transaction Test (2024 Thresholds)

The HSR Act's size-of-transaction test requires that the aggregate total amount of voting securities, assets, and/or non-corporate interests to be held as a result of the acquisition exceeds the applicable threshold. For transactions consummated or proposed to be consummated in 2024, the adjusted threshold is $119.5 million. See 89 Fed. Reg. 11,454 (Feb. 15, 2024) (2024 threshold adjustment).

The total enterprise value of the proposed acquisition is $370 million, which substantially exceeds the 2024 threshold of $119.5 million. Accordingly, the size-of-transaction test is satisfied. We note that for transactions exceeding $119.5 million but not exceeding $478.0 million, the size-of-persons test must also be satisfied. Because the transaction value exceeds $478.0 million is not the case here (the transaction value is $370 million), we proceed to analyze the size-of-persons test below.

C. Size-of-Persons Test

For transactions in which the size-of-transaction threshold is exceeded but the value does not exceed $478.0 million, the HSR Act requires that one party to the transaction have total assets or annual net sales of at least $239 million and the other party have total assets or annual net sales of at least $23.9 million (2024 adjusted thresholds).

Acquiring Person. HCM, as the UPE of HPE Fund IV, manages total assets exceeding $23.9 billion across all managed funds, inclusive of HPE Fund IV's $6.2 billion in committed capital and assets under management by HCM's prior vintage funds. This figure substantially exceeds the $239 million threshold applicable to the larger party. We have confirmed this figure with HCM's finance team and will include supporting data in the HSR filing.

Acquired Person. Ridgemark's total balance sheet assets — that is, the assets of Ridgemark as an operating entity, exclusive of client assets under management — are approximately $87 million as of its most recent fiscal year-end. This amount includes goodwill and intangible assets, receivables, fixed assets, and cash on the firm's balance sheet. This exceeds the $23.9 million threshold applicable to the smaller party. It is important to note that client AUM is not included in Ridgemark's total assets for purposes of the size-of-persons test, as client assets are beneficially owned by Ridgemark's clients, not by Ridgemark itself.

Accordingly, the size-of-persons test is satisfied, and the proposed transaction is reportable under the HSR Act.

D. Filing Fee

Under the 2024 HSR filing fee schedule, as amended by the Merger Filing Fee Modernization Act of 2022 and adjusted for inflation, the applicable fee is determined based on the aggregate total value of the transaction. For a transaction with a value of $370 million, the applicable fee band is $173.3 million to $536.4 million, which corresponds to a filing fee of $160,000.

The filing fee is payable by the Acquiring Person at the time of filing. Pursuant to the terms of the engagement letter between C&H and HCM dated May 28, 2024, the filing fee will be passed through to the client as a disbursement and is not included in C&H's legal fees for the engagement.

E. Filing Logistics

The HSR Notification and Report Form will be filed by HCM, as UPE, on behalf of the Acquiring Person. Ridgemark Capital Advisors, LLC will file as the Acquired Person. We are coordinating with Blackwell, Oakes & Hardin LLP, and specifically with Rajesh Subramaniam, Ridgemark's antitrust counsel, to ensure that both filings are prepared consistently and filed simultaneously.

Our target filing date is June 18, 2024, with both the Acquiring Person's and the Acquired Person's filings to be submitted on the same day. Assuming timely acceptance of both filings by the FTC's Premerger Notification Office, the initial 30-day waiting period would commence on the filing date and would expire at 11:59 p.m. Eastern Time on July 18, 2024, absent issuance of a Second Request or early termination of the waiting period.

The following NAICS codes are applicable to the businesses of the parties and will be referenced in the respective HSR filings:

• Ridgemark Capital Advisors, LLC: NAICS 523920 (Portfolio Management and Investment Advice); NAICS 523910 (Miscellaneous Intermediation).

• Dunmore Asset Management LLC: NAICS 523920 (Portfolio Management and Investment Advice).

We will include appropriate narrative descriptions of the parties' respective businesses and the nature of the competitive overlap in the filing, as required by the HSR Notification and Report Form and applicable instructions. The competitive overlap between Dunmore and Ridgemark in the alternative credit SMA and sub-advisory spaces will be disclosed in the filing, consistent with the parties' obligation to provide accurate and complete information.

IV. Competitive Overlap Analysis

A. Overview of Harrowgate's Existing Portfolio — Dunmore Asset Management LLC

Dunmore Asset Management LLC ("Dunmore") is an existing portfolio company of HPE Fund IV, acquired by the fund in the second quarter of 2023. Dunmore is a registered investment adviser with the SEC and is headquartered at 227 West Monroe Street, Suite 4100, Chicago, Illinois 60606. The firm is led by Franklin Broussard, who has served as Chief Executive Officer since its founding.

As of March 31, 2024, Dunmore reported total assets under management of approximately $3.9 billion across all strategies and client types. Of this total, approximately $2.1 billion — representing approximately 54% of Dunmore's total AUM — is attributable to alternative credit separately managed accounts. Dunmore's alternative credit SMA business encompasses portfolio management across various credit strategies, including private credit origination and lending, structured credit (including collateralized loan obligations and asset-backed securities), and distressed debt and special situations investing. Dunmore's clients include a range of U.S. institutional investors, including public and private pension funds, university endowments and foundations, and insurance companies.

Dunmore also provides sub-advisory services to a limited number of mutual fund complexes for funds with alternative credit investment mandates. While this sub-advisory business represents a smaller portion of Dunmore's total revenue relative to its SMA business, it contributes to the competitive overlap analysis discussed below.

Since HPE Fund IV's acquisition of Dunmore, HCM has pursued a strategy of building a diversified financial services platform within HPE Fund IV's portfolio, with a particular focus on alternative credit and specialized asset management. The proposed acquisition of Ridgemark is consistent with this platform-building strategy and would create a combined alternative credit franchise with aggregate AUM in excess of $8 billion.

B. Ridgemark's Alternative Credit Business

As noted in Section II.A above, Ridgemark reports total AUM of approximately $4.7 billion across all strategies. Of this total, approximately $1.4 billion — representing approximately 30% of total AUM — is attributable to alternative credit separately managed accounts. Ridgemark's alternative credit SMA strategies include private credit (direct lending and mezzanine), structured credit, and distressed debt, and the firm's institutional client base includes pension funds, endowments, and insurance companies, among others.

The business lines with potential competitive overlap with Dunmore are: (i) separately managed accounts focused on private credit and distressed debt for institutional investors; and (ii) sub-advisory services for alternative credit mutual fund complexes. In addition to these overlapping areas, Ridgemark offers a broader suite of SMA services and investment strategies — including investment-grade credit and multi-sector fixed income — that are not directly competitive with Dunmore's primary business lines and do not raise competitive overlap concerns.

It bears emphasis that Ridgemark's alternative credit SMA business, while significant in absolute terms at approximately $1.4 billion, represents a less dominant share of its overall business than Dunmore's alternative credit SMA business represents within Dunmore. Ridgemark's revenue mix is more diversified, with a substantial portion of management fees derived from non-alternative credit strategies. This diversification may be relevant to market definition arguments discussed below.

C. Horizontal Overlap — Alternative Credit SMAs for U.S. Institutional Clients

The most significant competitive overlap between the Harrowgate portfolio (via Dunmore) and Ridgemark exists in the market for separately managed accounts employing alternative credit strategies for U.S. institutional investors. Both Dunmore and Ridgemark actively compete for institutional SMA mandates involving private credit, structured credit, and distressed debt strategies.

Under a narrow market definition limited to alternative credit SMAs for U.S. institutional clients — which, as discussed in Section V below, represents the narrowest plausible product market that the FTC staff might adopt — the combined share of Dunmore and Ridgemark is estimated at approximately 14%–18%. This estimate is derived as follows:

Based on our analysis of publicly available data, industry reports, and discussions with the parties, we estimate the total addressable market for alternative credit SMAs serving U.S. institutional clients at approximately $19 billion to $25 billion. This range reflects uncertainty regarding the precise boundaries of the market and the inclusion or exclusion of certain borderline competitors and strategies. At the lower end of the market size estimate ($19 billion), the combined share would be approximately 18.4%; at the upper end ($25 billion), the combined share would be approximately 14.0%.

We note that FTC staff, if adopting this narrow market definition, could arrive at a total addressable market estimate within or outside this range, depending on the data sources and methodologies employed. We have identified the following key competitors that would be included in this narrowly defined market, among others:

• Crowne Albany Asset Management (alternative credit SMA platform)

• Penrose Investors (credit strategies)

• Ridgeline Investors (credit)

• Pemberton Capital Management (distressed debt and credit)

• Fenmore Asset Management

• Meridian Investment Management

• Crestline Asset Management (Harborview Asset Management)

• Cornavel Partners

• Calderon Investors

• Various other mid-size alternative credit managers

Under a broader market definition encompassing all credit-focused SMAs and alternative investment strategies offered to institutional investors — including investment-grade credit, high-yield, emerging markets debt, and other fixed income strategies in addition to alternative credit — the combined share of Dunmore and Ridgemark would be substantially lower, likely well below 10%. The broader market would include the major global asset managers (e.g., Dunmore Asset Advisors, Harborview Investment Management, Sundial Investment Management, Westmark Asset Advisors, and numerous other large institutional managers) whose total credit and fixed income AUM dwarfs that of both Dunmore and Ridgemark.

We have also conducted a preliminary analysis of the Herfindahl-Hirschman Index ("HHI") impact of the proposed transaction under the narrow market definition. The HHI is calculated as the sum of the squares of each competitor's market share. Under the 2023 DOJ/FTC Merger Guidelines, a transaction that results in an HHI increase of more than 100 points in a market with a post-merger HHI above 1,800 is presumed to warrant further investigation, and potentially to enhance market power. Our preliminary HHI analysis, which necessarily relies on estimates of competitor market shares that may differ from those employed by FTC staff, suggests that the post-merger HHI increase could approach or exceed these thresholds depending on the assumptions used regarding the distribution of market share among competitors. In a market with a moderate number of competitors and relatively even share distribution, the addition of approximately 6%–8% (Ridgemark's share under the narrow definition) to Dunmore's existing approximately 8%–11% share would produce an HHI increase in the range of approximately 100–180 points. However, we emphasize that HHI calculations at this stage are inherently imprecise and are highly sensitive to assumptions about the total market size and the distribution of competitor shares.

D. Horizontal Overlap — Sub-Advisory Services for Alternative Credit Mutual Funds

In addition to the SMA overlap discussed above, both Ridgemark and Dunmore provide sub-advisory services to mutual fund complexes for funds with alternative credit mandates. In a sub-advisory arrangement, the asset manager provides portfolio management services under an agreement with the fund's primary investment adviser (the mutual fund sponsor), which retains overall supervisory responsibility for the fund.

This sub-advisory segment is a relatively niche market. The number of alternative credit mutual funds that employ sub-advisors is limited, and the universe of managers qualified to serve as sub-advisors for such funds is smaller than the broader SMA market. As a consequence, concentration among sub-advisors in the alternative credit mutual fund space may be higher than in the SMA space, even though the absolute dollar values involved are smaller.

Market share data for the sub-advisory segment is more limited and market definition is less settled than for the SMA market. The FTC may view sub-advisory services for alternative credit mutual funds as a distinct product market, or it may analyze sub-advisory activity in conjunction with the broader SMA overlap. In either case, the overlapping sub-advisory businesses of Dunmore and Ridgemark provide a secondary basis for FTC staff concern and may contribute to the overall risk of a Second Request.

We assess the antitrust risk associated with the sub-advisory overlap as moderate. While the concentration levels may be higher in this segment, the absolute size of the sub-advisory market is relatively small, and the FTC may conclude that the competitive effects are not sufficiently significant to warrant an enforcement action on this basis alone. However, the sub-advisory overlap adds to the cumulative weight of the competitive concerns and should be addressed in any white paper or advocacy submission to FTC staff.

E. Vertical and Other Relationships

We have reviewed the business operations of HCM, HPE Fund IV, its portfolio companies, and Ridgemark for potential vertical integration concerns, conglomerate effects, and other non-horizontal theories of competitive harm.

We have not identified any significant vertical integration concerns. Neither Harrowgate nor Ridgemark operates in upstream markets (e.g., securities brokerage, prime brokerage, or custody services) or downstream markets (e.g., retail distribution platforms or fund administration) that would raise foreclosure or raising-rivals'-costs concerns in connection with the proposed transaction. Both Dunmore and Ridgemark are purchasers of services from third-party service providers (including prime brokers, custodians, fund administrators, and technology vendors), and the transaction does not alter the competitive dynamics in any of these upstream or downstream markets.

Similarly, we have not identified any conglomerate effects that would be viewed as problematic by the FTC. While HPE Fund IV's portfolio includes other financial services businesses in addition to Dunmore, none of these portfolio companies operates in markets that are adjacent to or complementary with Ridgemark's business in a manner that would give rise to bundling, tying, or portfolio-power concerns.

V. Relevant Market Definition Considerations

A. Product Market

Market definition is a critical element of the antitrust analysis. The narrower the product market, the higher the combined market share of Dunmore and Ridgemark, and the greater the potential for FTC concern. Conversely, a broader market definition dilutes the combined share and reduces the significance of the competitive overlap.

The narrowest plausible product market is separately managed accounts employing alternative credit strategies — specifically, private credit, structured credit, and distressed debt — for U.S. institutional investors. This narrow definition treats alternative credit SMAs as a distinct product market, separate from other types of SMAs (e.g., investment-grade fixed income, equity, multi-asset) and from other investment vehicles (e.g., commingled funds, exchange-traded funds). The rationale for such a narrow definition would be that institutional investors seeking exposure to alternative credit strategies through a separately managed account structure face a limited set of qualified managers and do not view SMAs employing traditional credit strategies or other investment vehicles as reasonably interchangeable substitutes.

However, there are strong arguments for a broader market definition, and we believe these arguments are ultimately persuasive. Broader alternatives include:

(i) All credit-focused SMAs — a market that includes not only alternative credit SMAs but also investment-grade credit, high-yield, emerging markets debt, and other fixed income and credit strategies offered through separately managed accounts. Many institutional investors allocate across the credit spectrum and treat alternative credit as part of a broader credit allocation, suggesting demand-side substitutability.

(ii) All alternative investment management services — a market that includes not only SMAs but also commingled funds, limited partnership vehicles, and other structures through which institutional investors access alternative credit strategies. Many managers offer their strategies through multiple vehicle types, and institutional investors frequently evaluate managers across vehicle types, suggesting supply-side substitutability.

(iii) All institutional asset management services — the broadest plausible market, encompassing all investment management services offered to institutional clients regardless of strategy or vehicle type. Under this definition, the combined share of Dunmore and Ridgemark would be de minimis.

We anticipate that FTC staff will test the narrowest plausible market definition, as this is consistent with the agency's general approach to merger review. However, we believe that strong arguments can be made for a broader market definition, and we discuss the preparation of those arguments in Section IX below.

As noted above, sub-advisory services for alternative credit mutual funds may be analyzed as a separate product market. The FTC could define this as a distinct market on the theory that sub-advisory mandates are procured through a different competitive process (typically an RFP from the fund sponsor), subject to different contractual terms (sub-advisory agreements with specific fee structures and performance benchmarks), and serve different end-investors (retail and institutional mutual fund shareholders rather than direct institutional SMA clients). Alternatively, the FTC could analyze sub-advisory activity as part of the broader alternative credit management market.

B. Geographic Market

Both Dunmore and Ridgemark serve clients located throughout the United States, and neither firm's business is limited to a particular geographic region. Dunmore is headquartered in Chicago and Ridgemark is headquartered in Boston, but both firms market their services nationally and manage portfolios for institutional clients across the country.

The relevant geographic market is likely the United States as a whole. While some institutional investors may consider foreign-based alternative credit managers as potential alternatives, the regulatory requirements of SEC registration, the operational preferences of U.S. institutional investors for domestically based managers, and the relationship-driven nature of the SMA sales process all support a national market definition rather than a global one.

We do not anticipate that the FTC will attempt to define a geographic market narrower than the United States. Alternative credit SMA mandates are not geographically localized, and institutional investors routinely hire managers located in different cities and regions.

C. Competitive Dynamics and Entry Barriers

The alternative credit SMA space is characterized by competitive dynamics and entry barriers that are relevant to the FTC's assessment of the proposed transaction's likely competitive effects.

Entry barriers. Entry into the alternative credit SMA market for institutional clients is subject to several meaningful barriers:

• Track record requirements. Institutional investors and their consultants typically require a minimum track record of three to five years (and often longer) before considering a manager for an SMA mandate. New entrants without an established track record face significant difficulty winning institutional mandates.

• Regulatory registration. Managers must register with the SEC under the Investment Advisers Act of 1940 and comply with ongoing regulatory requirements, including Form ADV filings, compliance policies, and examination obligations.

• Institutional due diligence. Institutional investors conduct extensive operational and investment due diligence before hiring a manager, including review of investment processes, risk management frameworks, compliance infrastructure, key person risk, and business continuity planning. Smaller or newer managers may lack the operational infrastructure to pass institutional due diligence.

• Relationship-driven sales cycles. The SMA sales process is heavily relationship-driven, with sales cycles often lasting 12 to 24 months or longer. Managers must maintain relationships with institutional investors, investment consultants, and gatekeepers over extended periods to build a pipeline of potential mandates.

• Specialized expertise. Alternative credit strategies — particularly structured credit and distressed debt — require specialized portfolio management expertise, sourcing capabilities, and analytical infrastructure that are not easily replicated by generalist asset managers.

Competitive landscape. Notwithstanding these entry barriers, the alternative credit SMA market includes a significant number of established competitors, ranging from large global alternative asset managers (such as Crestline Growth Partners, Ares, Apollo, and Penrose Capital Group) to specialized mid-size managers. No single firm dominates the market, and institutional investors typically maintain relationships with multiple managers across their alternative credit allocation.

Switching costs. Switching costs for institutional clients are moderate. SMA agreements typically include notice periods of 30 to 90 days, and the operational transition from one manager to another — including transfer of portfolio positions, account setup, and reporting integration — can take several weeks to several months. However, institutional investors do periodically terminate and replace SMA managers based on performance, strategy fit, organizational changes, and other factors. The existence of moderate switching costs may support the argument that the proposed transaction is unlikely to result in significant competitive harm, as post-merger price increases or service degradation would be constrained by the threat of client attrition.

VI. Assessment of Second Request Risk

A. Factors Favoring a Second Request

Several factors increase the probability that the FTC will issue a Second Request in connection with the proposed transaction:

Combined market share under narrow market definition. As discussed in Section IV.C above, the combined share of Dunmore and Ridgemark in alternative credit SMAs for U.S. institutional clients is estimated at approximately 14%–18% under the narrowest plausible market definition. While this level of concentration does not trigger a presumption of competitive harm, it exceeds the threshold at which FTC staff typically undertakes more detailed investigation. In our experience, combined shares in the range of 12%–15% or higher in a narrowly defined market are sufficient to warrant staff interest, particularly in industries that are the subject of broader agency focus.

FTC attention to financial services consolidation. The alternative credit SMA space has been an area of recent FTC attention as part of the agency's broader scrutiny of consolidation in the financial services sector. The current FTC leadership has signaled heightened interest in transactions involving private equity sponsors and platform-building strategies in the financial services industry, and the proposed transaction fits squarely within this area of focus. Recent public statements by FTC Chair Lina Khan and other commissioners have highlighted concerns about serial acquisitions and roll-up strategies in concentrated markets, and the HPE Fund IV platform strategy may attract attention on these grounds.

Overlapping sub-advisory activity. The presence of overlapping sub-advisory activity in alternative credit mutual funds provides a secondary basis for FTC staff concern, as discussed in Section IV.D above. Even if the SMA overlap alone would not be sufficient to warrant a Second Request, the additional overlap in the sub-advisory space may tip the balance in favor of further investigation.

Item 4(c) and 4(d) documents. We anticipate that the Item 4(c) and 4(d) documents produced with the HSR filing may contain competitive analyses, market share estimates, strategic rationale memoranda, or internal communications that reference Dunmore as a competitor to Ridgemark or that discuss the competitive dynamics of the alternative credit SMA market. Such documents — particularly if they characterize the market as concentrated, identify Dunmore as a "key competitor" or "closest competitor" to Ridgemark, or discuss the transaction's potential to reduce competition — could heighten FTC staff interest and support a decision to issue a Second Request. We discuss the identification and review of these documents in Section VIII below.

Transaction characteristics. The transaction value of $370 million, the involvement of a private equity fund with an existing platform investment in the same space, and the structure of the transaction as a platform expansion all present characteristics that tend to draw heightened regulatory scrutiny. Private equity platform-building strategies have been the subject of increasing FTC and DOJ attention in recent years, and the current enforcement environment is marked by a willingness to investigate transactions that, in prior enforcement eras, might not have attracted significant agency interest.

B. Factors Mitigating Against a Second Request

Several factors weigh against the issuance of a Second Request:

Combined share below traditional enforcement thresholds. The combined share of 14%–18% under the narrow market definition is well below the 30% threshold that has historically been associated with a structural presumption of competitive harm under United States v. Philadelphia National Bank, 374 U.S. 321 (1963), and its progeny. While the 2023 Merger Guidelines lower the structural presumption threshold to 30% (and, in some circumstances, to lower levels for highly concentrated markets), the combined share in this case remains below those levels. An enforcement action at these concentration levels would be unusual by historical standards.

Broader market definition significantly reduces combined share. Under a broader market definition encompassing all credit-focused SMAs or all alternative investment management services, the combined share of Dunmore and Ridgemark would be well below 10% and would not raise competitive concerns under any standard. We believe that strong arguments can be made for such a broader market definition, and that a reasonable FTC staff analysis might conclude that the narrowest market definition is not appropriate.

Fragmented competitive landscape. The alternative credit SMA market, even under a narrow definition, is fragmented, with numerous competitors of varying sizes. No single firm dominates the market, and institutional investors have a wide range of alternative managers from which to choose. This fragmentation suggests that the merger is unlikely to result in a significant increase in market power.

Differentiated strategies and partially non-overlapping client bases. Dunmore and Ridgemark, while both operating in the alternative credit space, employ differentiated investment strategies and serve partially non-overlapping client bases. Dunmore's emphasis on structured credit and CLO-related strategies differs from Ridgemark's greater focus on direct lending and distressed opportunities. Similarly, the two firms have different geographic concentrations within their institutional client bases and different relationships with investment consultants. These differences reduce the degree to which Dunmore and Ridgemark are "close competitors" and mitigate the potential competitive harm from combining them under common ownership.

Limited historical precedent for enforcement at these levels. Our review of FTC enforcement actions and consent decrees in the investment advisory and asset management sectors reveals limited historical precedent for enforcement actions at the concentration levels present here. While the FTC has challenged transactions involving higher levels of concentration in financial services (e.g., challenges to certain bank mergers and insurance transactions), we are not aware of enforcement actions in the SMA or investment advisory space at combined shares in the 14%–18% range.

C. Probability Assessment

Weighing the factors discussed above, we assess the overall probability of receiving a Second Request as moderate-to-high, estimated at approximately 40%–60%. This assessment reflects the following considerations:

The overlapping credit strategy businesses of Dunmore and Ridgemark, combined with the private equity platform-building dynamic, elevate the risk of a Second Request beyond what the market share figures alone would suggest. The current enforcement environment — characterized by heightened FTC scrutiny of financial services consolidation and private equity acquisitions — further increases the probability.

At the same time, the relatively moderate combined market share (14%–18%), the availability of strong arguments for a broader market definition, and the fragmented nature of the competitive landscape provide meaningful counterweights that reduce the probability below levels that would be associated with a truly high-risk transaction.

We note that the FTC (rather than the DOJ) is likely to receive clearance for this transaction through the interagency clearance process, given the transaction's focus on financial services and asset management — an area that falls primarily within the FTC's traditional purview. The FTC's Bureau of Competition, Mergers IV Division, which handles financial services transactions, would likely be the reviewing division. We have experience working with the staff in Mergers IV and believe we can engage productively with them if a Second Request is issued.

VII. Recommendation Regarding Early Termination

Based on our assessment of the antitrust risks associated with the proposed transaction, we recommend that the parties not request early termination of the initial 30-day HSR waiting period. This recommendation is based on the following considerations:

(a) signaling risk. Requesting early termination when identifiable competitive overlaps exist can signal to FTC staff that the filing parties do not anticipate scrutiny, potentially inviting closer review and staff annoyance. FTC staff members who receive an early termination request routinely review the filing for competitive overlaps, and a request accompanied by a filing that discloses significant horizontal overlap may be perceived as indicating that the parties have not adequately assessed the competitive implications of their transaction — or, worse, that they are attempting to minimize those implications. In our experience, this dynamic can accelerate staff escalation and increase the likelihood of a Second Request.

(b) Unlikelihood of grant. Given the moderate-to-high probability of a Second Request that we have assessed, early termination is unlikely to be granted. The FTC rarely grants early termination in transactions that present identifiable horizontal overlaps warranting further investigation. Filing an early termination request that is subsequently denied provides no benefit to the parties and may consume staff attention that could otherwise be directed toward resolving questions about the transaction informally.

(c) Strategic use of waiting period. The parties should use the full 30-day waiting period to prepare for a possible Second Request. This preparation includes identification of custodians whose files would be subject to a Second Request, implementation of document preservation protocols, development of a compliance plan for Second Request response, and preparation of advocacy materials (including a white paper on relevant market definition and competitive dynamics) that could be deployed in discussions with FTC staff. Beginning this preparation during the initial waiting period, rather than after a Second Request issues, will reduce the time and cost of compliance if a Second Request is received.

We understand that the deal team anticipated the potential for a Second Request given the overlapping credit strategies of Dunmore and Ridgemark, and we believe that this anticipation is well-founded. The recommendation not to request early termination is consistent with the prudent approach of allowing the full initial waiting period to elapse while using that time productively.

If, contrary to our expectations, the FTC does not issue a Second Request during the initial 30-day waiting period, the waiting period will expire on July 18, 2024, and the parties will be free to consummate the transaction thereafter, subject to satisfaction of all other closing conditions under the MIPA.

VIII. Item 4(c) and 4(d) Document Considerations

The HSR Notification and Report Form requires the production of certain categories of documents as part of the filing. Two categories of particular significance are:

Item 4(c) documents are documents that were prepared by or for any officer or director of the filing person (or, in the case of unincorporated entities, equivalent individuals) for the purpose of evaluating or analyzing the acquisition with respect to market shares, competition, competitors, markets, potential for sales growth, or expansion into product or geographic markets. This category includes investment committee memoranda, board presentations, strategic analyses, competitive positioning studies, and similar documents that discuss the competitive implications of the transaction.

Item 4(d) documents include confidential information memoranda ("CIMs"), banker presentations, management presentations, board materials, and similar documents prepared by or on behalf of the parties in connection with the transaction. These materials typically include descriptions of the target's business, competitive positioning, market share, and growth opportunities.

In the context of the proposed transaction, we are particularly concerned about the following categories of documents that may be responsive to the Item 4(c) and 4(d) requirements:

• Investment committee memoranda and presentations prepared by the HPE Fund IV deal team (including Marcus Hale and Diane Ochoa) analyzing the Ridgemark acquisition, to the extent such documents discuss competitive overlap between Dunmore and Ridgemark, combined market share in alternative credit SMAs, or the strategic rationale for the transaction in terms of competitive positioning.

• Competitive landscape analyses or market mapping exercises prepared by Greycastle Partners LLC in connection with its advisory engagement, to the extent such documents identify Dunmore as a competitor to Ridgemark or estimate market share in the alternative credit SMA space.

• The confidential information memorandum prepared by Cairnstone Advisory Group LLC on behalf of Ridgemark, which likely contains descriptions of Ridgemark's competitive positioning, market share, and key competitors.

• Board or management presentations at Ridgemark discussing the transaction, competitive dynamics, or the firm's market position relative to Dunmore and other competitors.

• Any internal communications among HCM or HPE Fund IV personnel discussing the competitive overlap or synergies arising from combining Dunmore and Ridgemark under common ownership.

Documents referencing competitive overlap between Dunmore and Ridgemark, combined market share estimates, or competitive dynamics in the alternative credit SMA space will be of particular interest to FTC staff reviewing the HSR filing. Such documents may provide the evidentiary foundation for a decision to issue a Second Request, as they may be construed as admissions by the parties that the transaction raises competitive concerns.

Recommendation. We recommend that the document collection process for Item 4(c) and 4(d) materials be completed by June 14, 2024, four days prior to the target filing date. This will allow C&H sufficient time to review the collected documents for responsiveness, privilege, and strategic sensitivity before finalizing the HSR filing on June 18, 2024. Custodians at HCM, Dunmore Asset Management LLC, and Greycastle Partners LLC should be identified and instructed to collect and produce responsive materials promptly.

A separate, more detailed memorandum with specific Item 4(c) and 4(d) collection instructions — including custodian identification, search terms, date ranges, and production format requirements — is being prepared by Elliot Nguyen and Aaron Liu of C&H and will be circulated to Marcus Hale and Diane Ochoa in the coming days. That memorandum will also address coordination with Blackwell, Oakes & Hardin LLP regarding Ridgemark's own Item 4(c) and 4(d) collection process.

IX. Potential Remedies and Mitigation Strategies

A. If a Second Request Issues

In the event that the FTC issues a Second Request, we recommend the following approach:

Prompt engagement with FTC staff. We would seek to engage promptly with the FTC's Bureau of Competition, Mergers IV Division staff to discuss the transaction, understand the staff's competitive concerns, and explore opportunities to narrow the scope of the Second Request. In our experience, early and constructive engagement with staff can significantly reduce the burden and duration of the Second Request process, and can help focus the investigation on the issues that are most relevant to the agency's competitive analysis.

Market definition advocacy. A central element of our engagement strategy would be to present arguments for a broader relevant market definition — specifically, a market encompassing all credit-focused SMAs, or all alternative investment strategies, offered to institutional investors — that would reduce the combined share of Dunmore and Ridgemark well below levels of competitive concern. We would prepare and submit a detailed advocacy submission (a "white paper") supported by economic analysis and empirical evidence demonstrating demand-side substitutability across credit strategies and supply-side substitutability across investment vehicles.

Emphasis on competitive differentiation. We would also emphasize the differentiation between Dunmore's and Ridgemark's respective investment strategies, client bases, and organizational capabilities. As noted above, the two firms employ different approaches within the broad alternative credit space, serve partially non-overlapping client bases, and maintain distinct relationships with investment consultants. These differences reduce the degree of head-to-head competition between the two firms and mitigate the potential for competitive harm from common ownership.

Economic analyses and industry expert submissions. We would engage an economist, likely from a recognized economic consulting firm with expertise in financial services markets, to prepare quantitative analyses supporting our market definition and competitive effects arguments. These analyses could include demand-side substitution analysis, critical loss analysis, and econometric modeling of competitive dynamics in the SMA market. We would also consider submitting declarations or reports from industry experts — such as investment consultants or institutional investor representatives — attesting to the breadth and competitiveness of the alternative credit SMA market.

B. Potential Structural or Behavioral Remedies

In the event that the FTC identifies a competition concern that cannot be resolved through market definition arguments or competitive effects analysis, the parties should be prepared to consider potential remedies. Based on our experience with FTC merger remedies and our assessment of the competitive landscape, the most likely remedies, if any were required, could include:

(i) Divestiture of a portion of one platform's alternative credit SMA business. The FTC could require the divestiture of a subset of SMA client accounts or a discrete investment team from either Dunmore or Ridgemark to a third-party buyer. Such a divestiture would be designed to maintain the pre-merger level of competition in the narrowly defined market. We note, however, that SMA divestitures in the asset management context present significant practical challenges, including the need for client consent, the risk of client attrition, and the difficulty of identifying a suitable buyer with the operational and investment capabilities to absorb the divested business.

(ii) Behavioral commitments. The FTC could seek behavioral remedies, such as requirements that Dunmore and Ridgemark maintain firewall protections between their respective investment teams, prohibiting the sharing of competitively sensitive information (e.g., pricing, client pipeline, and investment strategies). While the FTC has historically disfavored behavioral remedies in merger cases — preferring structural remedies that do not require ongoing monitoring — behavioral commitments may be more acceptable in the asset management context, where the regulated nature of the industry and existing compliance infrastructure provide a framework for monitoring and enforcement.

At this stage, based on our assessment of the combined market share (14%–18% under the narrow definition), the availability of strong market definition arguments, and the limited precedent for FTC enforcement in this space, we do not believe that a remedy will be necessary to obtain clearance. However, we recommend that the possibility of a remedy be considered in transaction planning and that the MIPA's provisions regarding regulatory conditions and remedies be reviewed to ensure that the parties have appropriate flexibility in the event that a remedy discussion becomes necessary. In particular, we note that the definition of "Burdensome Condition" in the MIPA — which typically governs the buyer's obligation to accept divestitures or other remedies as a condition to closing — should be reviewed by deal counsel to confirm that it provides appropriate protections for HPE Fund IV.

X. Impact on Transaction Timeline and MIPA Provisions

The proposed transaction's MIPA includes a regulatory closing condition requiring HSR clearance — defined as expiration or early termination of the applicable waiting period under the HSR Act, or receipt of affirmative clearance from the FTC or DOJ, as applicable. Until this condition is satisfied, the transaction cannot be consummated.

Under the expected timeline, if no Second Request is issued, the initial 30-day waiting period would expire on July 18, 2024, and the transaction could close shortly thereafter, subject to satisfaction of all other closing conditions.

However, if a Second Request is issued, the initial 30-day waiting period is tolled upon issuance of the Second Request. A new 30-day waiting period begins only upon the certification of substantial compliance with the Second Request by both the Acquiring Person and the Acquired Person. As a practical matter, the process of complying with a Second Request — which typically involves the collection, review, and production of large volumes of documents from multiple custodians, as well as the preparation and submission of interrogatory responses and data — can take several months. Based on our experience with Second Requests in comparable financial services transactions, we estimate that a Second Request could extend the regulatory clearance timeline by approximately three to six months from the date of issuance, depending on the scope of the request, the volume of responsive documents, and the pace of engagement with FTC staff.

A Second Request would also significantly increase the legal and professional costs associated with the transaction. In our experience, Second Request compliance costs in transactions of this size and complexity can range from approximately $3 million to $8 million or more in outside legal fees, document review costs, and economic consulting expenses, depending on the scope and duration of the investigation.

In light of these potential impacts, we recommend that deal counsel review the following provisions of the MIPA in coordination with C&H:

• Outside date / drop-dead date. The MIPA's outside date — the date after which either party may terminate the agreement if the closing has not occurred — should provide adequate runway to accommodate the potential delay associated with a Second Request. If the outside date does not provide at least six months from the date of filing, the parties should consider whether an extension mechanism is available under the MIPA or whether an amendment may be necessary.

• Termination provisions. The MIPA's termination provisions should be reviewed to confirm the allocation of risk in the event that HSR clearance cannot be obtained. In particular, the buyer's ability to terminate the agreement in the event of a protracted regulatory process, and the seller's remedies in such event, should be clearly understood by all parties.

• Rever

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT
MEMORANDUM
TO: Gavin Trask, Managing Partner & Chairman, Harrowgate Capital Management LLC Diane Ochoa, Partner & Head of Financial Services Investments, Harrowgate Capital Management LLC
FROM: Howard Bellamy, Partner, Antitrust & Competition Group, Calderwood & Harkness LLP Elliot Nguyen, Associate, Antitrust & Competition Group, Calderwood & Harkness LLP
DATE: June 10, 2024
RE: Antitrust Risk Assessment — Proposed Acquisition of Ridgemark Capital Advisors, LLC by Harrowgate Private Equity Fund IV, L.P.
C&H Matter No.: 1003-00001
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I. Executive Summary
Calderwood & Harkness LLP ("C&H" or the "Firm") has been retained by Harrowgate Capital Management LLC ("HCM"), in its capacity as general partner of Harrowgate Private Equity Fund IV, L.P. ("HPE Fund IV"), to provide antitrust counsel in connection with HPE Fund IV's proposed acquisition of 100% of the outstanding membership interests of Ridgemark Capital Advisors, LLC ("Ridgemark" or "RCA"). This memorandum sets forth our preliminary assessment of the antitrust risks associated with the proposed transaction, our analysis of applicable filing requirements under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and our recommended course of action with respect to timing, filing strategy, and preparation for potential agency engagement.
The proposed transaction is governed by that certain Membership Interest Purchase Agreement dated June 4, 2024 (the "MIPA"), among HPE Fund IV, as buyer, Ridgemark Capital Advisors, LLC, Jonathan Kessler, Priya Narayanan, other employee partners of Ridgemark, and Thornfield Growth Partners, LLC, as sellers. The total enterprise value of the transaction is $370 million, with an equity purchase price of $328 million after deduction of approximately $42 million in net funded debt.
Based on our analysis, the transaction requires a filing under the HSR Act (15 U.S.C. § 18a; 16 C.F.R. Parts 801–803), as both the size-of-transaction and size-of-persons thresholds are exceeded. The applicable filing fee under the 2024 fee schedule is $160,000.
The principal antitrust concern arising from the proposed transaction stems from the horizontal competitive overlap between Ridgemark and Dunmore Asset Management LLC ("Dunmore"), an existing HPE Fund IV portfolio company acquired in 2023. Both Ridgemark and Dunmore operate in the alternative credit separately managed accounts ("SMA") space and provide sub-advisory services for alternative credit mutual funds. Following consummation of the proposed transaction, both firms would be under common ownership within the HPE Fund IV portfolio.
Under a narrow market definition for alternative credit SMAs serving U.S. institutional clients — the narrowest plausible product market definition that the Federal Trade Commission ("FTC") might adopt — the combined estimated market share of Dunmore and Ridgemark is approximately 14%–18%, depending on assumptions regarding the total addressable market. Under a broader market definition encompassing all credit-focused SMAs and alternative investment strategies, the combined share would be substantially lower, likely well below 10%.
Our assessment is that there is a meaningful probability — which we estimate at approximately 40%–60% — that the FTC will issue a Request for Additional Information and Documentary Material (a "Second Request") pursuant to Section 7A(e) of the HSR Act. We accordingly recommend against requesting early termination of the initial 30-day HSR waiting period, as such a request is unlikely to be granted under the circumstances and could invite accelerated scrutiny from FTC staff.
Notwithstanding the risk of a Second Request, we assess the overall antitrust risk of a formal challenge or enforcement action by the FTC as low-to-moderate. The combined market shares under the narrowest plausible market definition remain below the levels at which courts have historically found a presumption of competitive harm, and the market is characterized by numerous competitors, differentiated strategies, and moderate entry barriers. We believe the transaction is ultimately clearable, though the path to clearance may involve additional time and expense associated with responding to a Second Request and engaging with FTC Mergers Division staff.
The balance of this memorandum provides a detailed analysis supporting these conclusions and sets forth our recommended next steps.
II. Transaction Overview
A. Parties to the Transaction
Acquiring Person. The acquiring person for HSR Act purposes is Harrowgate Capital Management LLC ("HCM"), a Delaware limited liability company, in its capacity as the general partner and Ultimate Parent Entity ("UPE") of Harrowgate Private Equity Fund IV, L.P. ("HPE Fund IV"), a Delaware limited partnership. HCM is headquartered at 1200 North Market Street, Suite 1400, Wilmington, Delaware 19801. HCM serves as the general partner and investment manager for each of the Harrowgate private equity funds and exercises ultimate investment decision-making authority over the portfolio investments of HPE Fund IV.
HPE Fund IV is a private equity fund that held its final close in December 2023 with total committed capital of approximately $6.2 billion. The fund's investment strategy is focused on middle-market financial services and asset management platform acquisitions, with a particular emphasis on scalable fee-based businesses with durable revenue streams. HPE Fund IV has completed three prior platform acquisitions since its formation, including the acquisition of Dunmore Asset Management LLC in 2023.
The key principals involved in the proposed transaction on the Harrowgate side include: Gavin Trask, Managing Partner & Chairman of HCM; Diane Ochoa, Partner and Head of Financial Services Investments at HCM; and Marcus Hale, Vice President, Deal Execution, who serves as the day-to-day deal lead for the Ridgemark acquisition.
Target / Acquired Person. The acquired person is Ridgemark Capital Advisors, LLC ("Ridgemark" or "RCA"), a Delaware limited liability company headquartered at 600 Boylston Street, Suite 3200, Boston, Massachusetts 02116. Ridgemark is a registered investment adviser with the U.S. Securities and Exchange Commission ("SEC") under the Investment Advisers Act of 1940, as amended, and is registered with the Financial Industry Regulatory Authority ("FINRA") under CRD Number 298174.
As of March 31, 2024, Ridgemark reported total assets under management ("AUM") of approximately $4.7 billion across all strategies and client types. For the trailing twelve-month ("TTM") period ended March 31, 2024, Ridgemark generated total revenue of approximately $58.3 million, consisting of management fees of approximately $51.1 million and performance and incentive fees of approximately $7.2 million. TTM EBITDA for the same period was approximately $16.8 million. Ridgemark employs approximately 112 individuals, including approximately 24 investment professionals across its portfolio management and research teams.
Ridgemark's principal business lines include: (i) separately managed accounts for institutional investors, including pension funds, endowments, foundations, and insurance companies; (ii) alternative credit strategies, encompassing private credit, structured credit, and distressed debt; and (iii) sub-advisory services provided to mutual fund complexes for funds with alternative credit mandates. Ridgemark has cultivated a reputation among institutional investors as a specialized manager in the alternative credit space, with a particular emphasis on structured credit and distressed opportunities.
The current ownership of Ridgemark is as follows: Jonathan Kessler, Founder and Chief Executive Officer, holds approximately 38% of the outstanding membership interests; Priya Narayanan, Chief Operating Officer, holds approximately 12%; other employee partners collectively hold approximately 20%; and Thornfield Growth Partners, LLC holds the remaining approximately 30%. Ms. Narayanan has served as COO since 2019 and oversees the firm's operations, compliance infrastructure, and client services functions.
Selling Sponsor. Thornfield Growth Partners, LLC ("Thornfield"), a Delaware limited liability company headquartered at 399 Park Avenue, 28th Floor, New York, New York 10022, is the current 30% minority investor in Ridgemark and is seeking a full cash exit in connection with the proposed transaction. Thornfield's estimated proceeds from the transaction are approximately $98.4 million, calculated as 30% of the $328 million equity purchase price, subject to customary post-closing adjustments as provided in the MIPA. Thornfield is represented by Lyle & Pennington LLP, with Thomas Pennington III serving as Lead Partner.
Rollover Participants. Pursuant to the terms of the MIPA, Jonathan Kessler and Priya Narayanan have each agreed to retain rollover equity interests in the post-closing entity. Mr. Kessler will retain approximately 10% of the equity of the post-closing entity, and Ms. Narayanan will retain approximately 10%, in each case subject to the terms and conditions of the rollover agreements to be executed at closing. The inclusion of rollover equity from the firm's two most senior executives is consistent with HPE Fund IV's investment strategy of incentivizing management alignment and continuity in portfolio company acquisitions.
B. Transaction Structure and Valuation
The proposed transaction is structured as an acquisition of 100% of the outstanding membership interests of Ridgemark Capital Advisors, LLC by HPE Fund IV. Following the closing, Ridgemark will become a wholly-owned subsidiary of HPE Fund IV (subject to the management rollover arrangements described above) and will operate alongside Dunmore Asset Management LLC as a separate portfolio company within the HPE Fund IV portfolio.
The key valuation and financial parameters of the transaction are as follows:
The acquisition will be financed through a combination of HPE Fund IV equity capital and third-party debt. Meridian National Bank, N.A. has provided a commitment letter dated June 3, 2024, for a $280 million senior secured credit facility to support the transaction. The commitment letter was executed by Gerald Statham, Senior Vice President, Sponsor Finance, at Meridian National Bank, and is subject to customary conditions precedent to funding, including satisfactory completion of due diligence and execution of definitive credit documentation.
The transaction was originated and advised on by two financial advisory firms. Greycastle Partners LLC acted as financial advisor to HCM and HPE Fund IV, with Mitchell Avery, Managing Director, serving as the lead advisor. Cairnstone Advisory Group LLC acted as financial advisor to Ridgemark, with Laura Feng, Managing Director, serving as the lead advisor. Ridgemark's legal counsel for the transaction is Blackwell, Oakes & Hardin LLP, with Catherine Oakes serving as Lead M&A Partner and Rajesh Subramaniam serving as Antitrust Partner.
The implied EBITDA multiple of approximately 22.0x is at the upper end of recent comparable transactions in the alternative asset management space, reflecting the premium value that Harrowgate attributes to Ridgemark's institutional client relationships, differentiated alternative credit capabilities, and the anticipated synergies with Dunmore's existing platform. We note that Item 4(c) and 4(d) documents may contain internal valuation analyses and synergy assumptions that reference competitive overlap between Dunmore and Ridgemark, and we address the implications of such documents in Section VIII below.
III. HSR Filing Requirements
A. Applicability of the HSR Act
The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, 15 U.S.C. § 18a, and its implementing regulations at 16 C.F.R. Parts 801–803, require that parties to certain mergers, acquisitions, and transfers of assets or voting securities file premerger notification with the FTC and the Antitrust Division of the U.S. Department of Justice ("DOJ") and observe a mandatory waiting period before consummating the transaction.
The proposed acquisition constitutes an "acquisition" of "voting securities" within the meaning of the HSR Act and its implementing regulations. Although Ridgemark is organized as a limited liability company and its equity is denominated as "membership interests" rather than "shares" or "stock," the FTC's rules treat interests in limited liability companies that confer voting rights and a right to the profits or assets of the entity upon dissolution as "voting securities" for purposes of the HSR Act. See 16 C.F.R. § 801.1(f)(1). Ridgemark's membership interests carry both voting and economic rights, and accordingly are treated as voting securities under the HSR Act.
Because the proposed transaction meets the notification thresholds described below, premerger notification filings are required by both the Acquiring Person (HCM, as UPE) and the Acquired Person (Ridgemark), and a mandatory waiting period must be observed before the transaction can be consummated.
B. Size-of-Transaction Test (2024 Thresholds)
The HSR Act's size-of-transaction test requires that the aggregate total amount of voting securities, assets, and/or non-corporate interests to be held as a result of the acquisition exceeds the applicable threshold. For transactions consummated or proposed to be consummated in 2024, the adjusted threshold is $119.5 million. See 89 Fed. Reg. 11,454 (Feb. 15, 2024) (2024 threshold adjustment).
The total enterprise value of the proposed acquisition is $370 million, which substantially exceeds the 2024 threshold of $119.5 million. Accordingly, the size-of-transaction test is satisfied. We note that for transactions exceeding $119.5 million but not exceeding $478.0 million, the size-of-persons test must also be satisfied. Because the transaction value exceeds $478.0 million is not the case here (the transaction value is $370 million), we proceed to analyze the size-of-persons test below.
C. Size-of-Persons Test
For transactions in which the size-of-transaction threshold is exceeded but the value does not exceed $478.0 million, the HSR Act requires that one party to the transaction have total assets or annual net sales of at least $239 million and the other party have total assets or annual net sales of at least $23.9 million (2024 adjusted thresholds).
Acquiring Person. HCM, as the UPE of HPE Fund IV, manages total assets exceeding $23.9 billion across all managed funds, inclusive of HPE Fund IV's $6.2 billion in committed capital and assets under management by HCM's prior vintage funds. This figure substantially exceeds the $239 million threshold applicable to the larger party. We have confirmed this figure with HCM's finance team and will include supporting data in the HSR filing.
Acquired Person. Ridgemark's total balance sheet assets — that is, the assets of Ridgemark as an operating entity, exclusive of client assets under management — are approximately $87 million as of its most recent fiscal year-end. This amount includes goodwill and intangible assets, receivables, fixed assets, and cash on the firm's balance sheet. This exceeds the $23.9 million threshold applicable to the smaller party. It is important to note that client AUM is not included in Ridgemark's total assets for purposes of the size-of-persons test, as client assets are beneficially owned by Ridgemark's clients, not by Ridgemark itself.
Accordingly, the size-of-persons test is satisfied, and the proposed transaction is reportable under the HSR Act.
D. Filing Fee
Under the 2024 HSR filing fee schedule, as amended by the Merger Filing Fee Modernization Act of 2022 and adjusted for inflation, the applicable fee is determined based on the aggregate total value of the transaction. For a transaction with a value of $370 million, the applicable fee band is $173.3 million to $536.4 million, which corresponds to a filing fee of $160,000.
The filing fee is payable by the Acquiring Person at the time of filing. Pursuant to the terms of the engagement letter between C&H and HCM dated May 28, 2024, the filing fee will be passed through to the client as a disbursement and is not included in C&H's legal fees for the engagement.
E. Filing Logistics
The HSR Notification and Report Form will be filed by HCM, as UPE, on behalf of the Acquiring Person. Ridgemark Capital Advisors, LLC will file as the Acquired Person. We are coordinating with Blackwell, Oakes & Hardin LLP, and specifically with Rajesh Subramaniam, Ridgemark's antitrust counsel, to ensure that both filings are prepared consistently and filed simultaneously.
Our target filing date is June 18, 2024, with both the Acquiring Person's and the Acquired Person's filings to be submitted on the same day. Assuming timely acceptance of both filings by the FTC's Premerger Notification Office, the initial 30-day waiting period would commence on the filing date and would expire at 11:59 p.m. Eastern Time on July 18, 2024, absent issuance of a Second Request or early termination of the waiting period.
The following NAICS codes are applicable to the businesses of the parties and will be referenced in the respective HSR filings:
• Ridgemark Capital Advisors, LLC: NAICS 523920 (Portfolio Management and Investment Advice); NAICS 523910 (Miscellaneous Intermediation).
• Dunmore Asset Management LLC: NAICS 523920 (Portfolio Management and Investment Advice).
We will include appropriate narrative descriptions of the parties' respective businesses and the nature of the competitive overlap in the filing, as required by the HSR Notification and Report Form and applicable instructions. The competitive overlap between Dunmore and Ridgemark in the alternative credit SMA and sub-advisory spaces will be disclosed in the filing, consistent with the parties' obligation to provide accurate and complete information.
IV. Competitive Overlap Analysis
A. Overview of Harrowgate's Existing Portfolio — Dunmore Asset Management LLC
Dunmore Asset Management LLC ("Dunmore") is an existing portfolio company of HPE Fund IV, acquired by the fund in the second quarter of 2023. Dunmore is a registered investment adviser with the SEC and is headquartered at 227 West Monroe Street, Suite 4100, Chicago, Illinois 60606. The firm is led by Franklin Broussard, who has served as Chief Executive Officer since its founding.
As of March 31, 2024, Dunmore reported total assets under management of approximately $3.9 billion across all strategies and client types. Of this total, approximately $2.1 billion — representing approximately 54% of Dunmore's total AUM — is attributable to alternative credit separately managed accounts. Dunmore's alternative credit SMA business encompasses portfolio management across various credit strategies, including private credit origination and lending, structured credit (including collateralized loan obligations and asset-backed securities), and distressed debt and special situations investing. Dunmore's clients include a range of U.S. institutional investors, including public and private pension funds, university endowments and foundations, and insurance companies.
Dunmore also provides sub-advisory services to a limited number of mutual fund complexes for funds with alternative credit investment mandates. While this sub-advisory business represents a smaller portion of Dunmore's total revenue relative to its SMA business, it contributes to the competitive overlap analysis discussed below.
Since HPE Fund IV's acquisition of Dunmore, HCM has pursued a strategy of building a diversified financial services platform within HPE Fund IV's portfolio, with a particular focus on alternative credit and specialized asset management. The proposed acquisition of Ridgemark is consistent with this platform-building strategy and would create a combined alternative credit franchise with aggregate AUM in excess of $8 billion.
B. Ridgemark's Alternative Credit Business
As noted in Section II.A above, Ridgemark reports total AUM of approximately $4.7 billion across all strategies. Of this total, approximately $1.4 billion — representing approximately 30% of total AUM — is attributable to alternative credit separately managed accounts. Ridgemark's alternative credit SMA strategies include private credit (direct lending and mezzanine), structured credit, and distressed debt, and the firm's institutional client base includes pension funds, endowments, and insurance companies, among others.
The business lines with potential competitive overlap with Dunmore are: (i) separately managed accounts focused on private credit and distressed debt for institutional investors; and (ii) sub-advisory services for alternative credit mutual fund complexes. In addition to these overlapping areas, Ridgemark offers a broader suite of SMA services and investment strategies — including investment-grade credit and multi-sector fixed income — that are not directly competitive with Dunmore's primary business lines and do not raise competitive overlap concerns.
It bears emphasis that Ridgemark's alternative credit SMA business, while significant in absolute terms at approximately $1.4 billion, represents a less dominant share of its overall business than Dunmore's alternative credit SMA business represents within Dunmore. Ridgemark's revenue mix is more diversified, with a substantial portion of management fees derived from non-alternative credit strategies. This diversification may be relevant to market definition arguments discussed below.
C. Horizontal Overlap — Alternative Credit SMAs for U.S. Institutional Clients
The most significant competitive overlap between the Harrowgate portfolio (via Dunmore) and Ridgemark exists in the market for separately managed accounts employing alternative credit strategies for U.S. institutional investors. Both Dunmore and Ridgemark actively compete for institutional SMA mandates involving private credit, structured credit, and distressed debt strategies.
Under a narrow market definition limited to alternative credit SMAs for U.S. institutional clients — which, as discussed in Section V below, represents the narrowest plausible product market that the FTC staff might adopt — the combined share of Dunmore and Ridgemark is estimated at approximately 14%–18%. This estimate is derived as follows:
Based on our analysis of publicly available data, industry reports, and discussions with the parties, we estimate the total addressable market for alternative credit SMAs serving U.S. institutional clients at approximately $19 billion to $25 billion. This range reflects uncertainty regarding the precise boundaries of the market and the inclusion or exclusion of certain borderline competitors and strategies. At the lower end of the market size estimate ($19 billion), the combined share would be approximately 18.4%; at the upper end ($25 billion), the combined share would be approximately 14.0%.
We note that FTC staff, if adopting this narrow market definition, could arrive at a total addressable market estimate within or outside this range, depending on the data sources and methodologies employed. We have identified the following key competitors that would be included in this narrowly defined market, among others:
• Crowne Albany Asset Management (alternative credit SMA platform)
• Penrose Investors (credit strategies)
• Ridgeline Investors (credit)
• Pemberton Capital Management (distressed debt and credit)
• Fenmore Asset Management
• Meridian Investment Management
• Crestline Asset Management (Harborview Asset Management)
• Cornavel Partners
• Calderon Investors
• Various other mid-size alternative credit managers
Under a broader market definition encompassing all credit-focused SMAs and alternative investment strategies offered to institutional investors — including investment-grade credit, high-yield, emerging markets debt, and other fixed income strategies in addition to alternative credit — the combined share of Dunmore and Ridgemark would be substantially lower, likely well below 10%. The broader market would include the major global asset managers (e.g., Dunmore Asset Advisors, Harborview Investment Management, Sundial Investment Management, Westmark Asset Advisors, and numerous other large institutional managers) whose total credit and fixed income AUM dwarfs that of both Dunmore and Ridgemark.
We have also conducted a preliminary analysis of the Herfindahl-Hirschman Index ("HHI") impact of the proposed transaction under the narrow market definition. The HHI is calculated as the sum of the squares of each competitor's market share. Under the 2023 DOJ/FTC Merger Guidelines, a transaction that results in an HHI increase of more than 100 points in a market with a post-merger HHI above 1,800 is presumed to warrant further investigation, and potentially to enhance market power. Our preliminary HHI analysis, which necessarily relies on estimates of competitor market shares that may differ from those employed by FTC staff, suggests that the post-merger HHI increase could approach or exceed these thresholds depending on the assumptions used regarding the distribution of market share among competitors. In a market with a moderate number of competitors and relatively even share distribution, the addition of approximately 6%–8% (Ridgemark's share under the narrow definition) to Dunmore's existing approximately 8%–11% share would produce an HHI increase in the range of approximately 100–180 points. However, we emphasize that HHI calculations at this stage are inherently imprecise and are highly sensitive to assumptions about the total market size and the distribution of competitor shares.
D. Horizontal Overlap — Sub-Advisory Services for Alternative Credit Mutual Funds
In addition to the SMA overlap discussed above, both Ridgemark and Dunmore provide sub-advisory services to mutual fund complexes for funds with alternative credit mandates. In a sub-advisory arrangement, the asset manager provides portfolio management services under an agreement with the fund's primary investment adviser (the mutual fund sponsor), which retains overall supervisory responsibility for the fund.
This sub-advisory segment is a relatively niche market. The number of alternative credit mutual funds that employ sub-advisors is limited, and the universe of managers qualified to serve as sub-advisors for such funds is smaller than the broader SMA market. As a consequence, concentration among sub-advisors in the alternative credit mutual fund space may be higher than in the SMA space, even though the absolute dollar values involved are smaller.
Market share data for the sub-advisory segment is more limited and market definition is less settled than for the SMA market. The FTC may view sub-advisory services for alternative credit mutual funds as a distinct product market, or it may analyze sub-advisory activity in conjunction with the broader SMA overlap. In either case, the overlapping sub-advisory businesses of Dunmore and Ridgemark provide a secondary basis for FTC staff concern and may contribute to the overall risk of a Second Request.
We assess the antitrust risk associated with the sub-advisory overlap as moderate. While the concentration levels may be higher in this segment, the absolute size of the sub-advisory market is relatively small, and the FTC may conclude that the competitive effects are not sufficiently significant to warrant an enforcement action on this basis alone. However, the sub-advisory overlap adds to the cumulative weight of the competitive concerns and should be addressed in any white paper or advocacy submission to FTC staff.
E. Vertical and Other Relationships
We have reviewed the business operations of HCM, HPE Fund IV, its portfolio companies, and Ridgemark for potential vertical integration concerns, conglomerate effects, and other non-horizontal theories of competitive harm.
We have not identified any significant vertical integration concerns. Neither Harrowgate nor Ridgemark operates in upstream markets (e.g., securities brokerage, prime brokerage, or custody services) or downstream markets (e.g., retail distribution platforms or fund administration) that would raise foreclosure or raising-rivals'-costs concerns in connection with the proposed transaction. Both Dunmore and Ridgemark are purchasers of services from third-party service providers (including prime brokers, custodians, fund administrators, and technology vendors), and the transaction does not alter the competitive dynamics in any of these upstream or downstream markets.
Similarly, we have not identified any conglomerate effects that would be viewed as problematic by the FTC. While HPE Fund IV's portfolio includes other financial services businesses in addition to Dunmore, none of these portfolio companies operates in markets that are adjacent to or complementary with Ridgemark's business in a manner that would give rise to bundling, tying, or portfolio-power concerns.
V. Relevant Market Definition Considerations
A. Product Market
Market definition is a critical element of the antitrust analysis. The narrower the product market, the higher the combined market share of Dunmore and Ridgemark, and the greater the potential for FTC concern. Conversely, a broader market definition dilutes the combined share and reduces the significance of the competitive overlap.
The narrowest plausible product market is separately managed accounts employing alternative credit strategies — specifically, private credit, structured credit, and distressed debt — for U.S. institutional investors. This narrow definition treats alternative credit SMAs as a distinct product market, separate from other types of SMAs (e.g., investment-grade fixed income, equity, multi-asset) and from other investment vehicles (e.g., commingled funds, exchange-traded funds). The rationale for such a narrow definition would be that institutional investors seeking exposure to alternative credit strategies through a separately managed account structure face a limited set of qualified managers and do not view SMAs employing traditional credit strategies or other investment vehicles as reasonably interchangeable substitutes.
However, there are strong arguments for a broader market definition, and we believe these arguments are ultimately persuasive. Broader alternatives include:
(i) All credit-focused SMAs — a market that includes not only alternative credit SMAs but also investment-grade credit, high-yield, emerging markets debt, and other fixed income and credit strategies offered through separately managed accounts. Many institutional investors allocate across the credit spectrum and treat alternative credit as part of a broader credit allocation, suggesting demand-side substitutability.
(ii) All alternative investment management services — a market that includes not only SMAs but also commingled funds, limited partnership vehicles, and other structures through which institutional investors access alternative credit strategies. Many managers offer their strategies through multiple vehicle types, and institutional investors frequently evaluate managers across vehicle types, suggesting supply-side substitutability.
(iii) All institutional asset management services — the broadest plausible market, encompassing all investment management services offered to institutional clients regardless of strategy or vehicle type. Under this definition, the combined share of Dunmore and Ridgemark would be de minimis.
We anticipate that FTC staff will test the narrowest plausible market definition, as this is consistent with the agency's general approach to merger review. However, we believe that strong arguments can be made for a broader market definition, and we discuss the preparation of those arguments in Section IX below.
As noted above, sub-advisory services for alternative credit mutual funds may be analyzed as a separate product market. The FTC could define this as a distinct market on the theory that sub-advisory mandates are procured through a different competitive process (typically an RFP from the fund sponsor), subject to different contractual terms (sub-advisory agreements with specific fee structures and performance benchmarks), and serve different end-investors (retail and institutional mutual fund shareholders rather than direct institutional SMA clients). Alternatively, the FTC could analyze sub-advisory activity as part of the broader alternative credit management market.
B. Geographic Market
Both Dunmore and Ridgemark serve clients located throughout the United States, and neither firm's business is limited to a particular geographic region. Dunmore is headquartered in Chicago and Ridgemark is headquartered in Boston, but both firms market their services nationally and manage portfolios for institutional clients across the country.
The relevant geographic market is likely the United States as a whole. While some institutional investors may consider foreign-based alternative credit managers as potential alternatives, the regulatory requirements of SEC registration, the operational preferences of U.S. institutional investors for domestically based managers, and the relationship-driven nature of the SMA sales process all support a national market definition rather than a global one.
We do not anticipate that the FTC will attempt to define a geographic market narrower than the United States. Alternative credit SMA mandates are not geographically localized, and institutional investors routinely hire managers located in different cities and regions.
C. Competitive Dynamics and Entry Barriers
The alternative credit SMA space is characterized by competitive dynamics and entry barriers that are relevant to the FTC's assessment of the proposed transaction's likely competitive effects.
Entry barriers. Entry into the alternative credit SMA market for institutional clients is subject to several meaningful barriers:
• Track record requirements. Institutional investors and their consultants typically require a minimum track record of three to five years (and often longer) before considering a manager for an SMA mandate. New entrants without an established track record face significant difficulty winning institutional mandates.
• Regulatory registration. Managers must register with the SEC under the Investment Advisers Act of 1940 and comply with ongoing regulatory requirements, including Form ADV filings, compliance policies, and examination obligations.
• Institutional due diligence. Institutional investors conduct extensive operational and investment due diligence before hiring a manager, including review of investment processes, risk management frameworks, compliance infrastructure, key person risk, and business continuity planning. Smaller or newer managers may lack the operational infrastructure to pass institutional due diligence.
• Relationship-driven sales cycles. The SMA sales process is heavily relationship-driven, with sales cycles often lasting 12 to 24 months or longer. Managers must maintain relationships with institutional investors, investment consultants, and gatekeepers over extended periods to build a pipeline of potential mandates.
• Specialized expertise. Alternative credit strategies — particularly structured credit and distressed debt — require specialized portfolio management expertise, sourcing capabilities, and analytical infrastructure that are not easily replicated by generalist asset managers.
Competitive landscape. Notwithstanding these entry barriers, the alternative credit SMA market includes a significant number of established competitors, ranging from large global alternative asset managers (such as Crestline Growth Partners, Ares, Apollo, and Penrose Capital Group) to specialized mid-size managers. No single firm dominates the market, and institutional investors typically maintain relationships with multiple managers across their alternative credit allocation.
Switching costs. Switching costs for institutional clients are moderate. SMA agreements typically include notice periods of 30 to 90 days, and the operational transition from one manager to another — including transfer of portfolio positions, account setup, and reporting integration — can take several weeks to several months. However, institutional investors do periodically terminate and replace SMA managers based on performance, strategy fit, organizational changes, and other factors. The existence of moderate switching costs may support the argument that the proposed transaction is unlikely to result in significant competitive harm, as post-merger price increases or service degradation would be constrained by the threat of client attrition.
VI. Assessment of Second Request Risk
A. Factors Favoring a Second Request
Several factors increase the probability that the FTC will issue a Second Request in connection with the proposed transaction:
Combined market share under narrow market definition. As discussed in Section IV.C above, the combined share of Dunmore and Ridgemark in alternative credit SMAs for U.S. institutional clients is estimated at approximately 14%–18% under the narrowest plausible market definition. While this level of concentration does not trigger a presumption of competitive harm, it exceeds the threshold at which FTC staff typically undertakes more detailed investigation. In our experience, combined shares in the range of 12%–15% or higher in a narrowly defined market are sufficient to warrant staff interest, particularly in industries that are the subject of broader agency focus.
FTC attention to financial services consolidation. The alternative credit SMA space has been an area of recent FTC attention as part of the agency's broader scrutiny of consolidation in the financial services sector. The current FTC leadership has signaled heightened interest in transactions involving private equity sponsors and platform-building strategies in the financial services industry, and the proposed transaction fits squarely within this area of focus. Recent public statements by FTC Chair Lina Khan and other commissioners have highlighted concerns about serial acquisitions and roll-up strategies in concentrated markets, and the HPE Fund IV platform strategy may attract attention on these grounds.
Overlapping sub-advisory activity. The presence of overlapping sub-advisory activity in alternative credit mutual funds provides a secondary basis for FTC staff concern, as discussed in Section IV.D above. Even if the SMA overlap alone would not be sufficient to warrant a Second Request, the additional overlap in the sub-advisory space may tip the balance in favor of further investigation.
Item 4(c) and 4(d) documents. We anticipate that the Item 4(c) and 4(d) documents produced with the HSR filing may contain competitive analyses, market share estimates, strategic rationale memoranda, or internal communications that reference Dunmore as a competitor to Ridgemark or that discuss the competitive dynamics of the alternative credit SMA market. Such documents — particularly if they characterize the market as concentrated, identify Dunmore as a "key competitor" or "closest competitor" to Ridgemark, or discuss the transaction's potential to reduce competition — could heighten FTC staff interest and support a decision to issue a Second Request. We discuss the identification and review of these documents in Section VIII below.
Transaction characteristics. The transaction value of $370 million, the involvement of a private equity fund with an existing platform investment in the same space, and the structure of the transaction as a platform expansion all present characteristics that tend to draw heightened regulatory scrutiny. Private equity platform-building strategies have been the subject of increasing FTC and DOJ attention in recent years, and the current enforcement environment is marked by a willingness to investigate transactions that, in prior enforcement eras, might not have attracted significant agency interest.
B. Factors Mitigating Against a Second Request
Several factors weigh against the issuance of a Second Request:
Combined share below traditional enforcement thresholds. The combined share of 14%–18% under the narrow market definition is well below the 30% threshold that has historically been associated with a structural presumption of competitive harm under United States v. Philadelphia National Bank, 374 U.S. 321 (1963), and its progeny. While the 2023 Merger Guidelines lower the structural presumption threshold to 30% (and, in some circumstances, to lower levels for highly concentrated markets), the combined share in this case remains below those levels. An enforcement action at these concentration levels would be unusual by historical standards.
Broader market definition significantly reduces combined share. Under a broader market definition encompassing all credit-focused SMAs or all alternative investment management services, the combined share of Dunmore and Ridgemark would be well below 10% and would not raise competitive concerns under any standard. We believe that strong arguments can be made for such a broader market definition, and that a reasonable FTC staff analysis might conclude that the narrowest market definition is not appropriate.
Fragmented competitive landscape. The alternative credit SMA market, even under a narrow definition, is fragmented, with numerous competitors of varying sizes. No single firm dominates the market, and institutional investors have a wide range of alternative managers from which to choose. This fragmentation suggests that the merger is unlikely to result in a significant increase in market power.
Differentiated strategies and partially non-overlapping client bases. Dunmore and Ridgemark, while both operating in the alternative credit space, employ differentiated investment strategies and serve partially non-overlapping client bases. Dunmore's emphasis on structured credit and CLO-related strategies differs from Ridgemark's greater focus on direct lending and distressed opportunities. Similarly, the two firms have different geographic concentrations within their institutional client bases and different relationships with investment consultants. These differences reduce the degree to which Dunmore and Ridgemark are "close competitors" and mitigate the potential competitive harm from combining them under common ownership.
Limited historical precedent for enforcement at these levels. Our review of FTC enforcement actions and consent decrees in the investment advisory and asset management sectors reveals limited historical precedent for enforcement actions at the concentration levels present here. While the FTC has challenged transactions involving higher levels of concentration in financial services (e.g., challenges to certain bank mergers and insurance transactions), we are not aware of enforcement actions in the SMA or investment advisory space at combined shares in the 14%–18% range.
C. Probability Assessment
Weighing the factors discussed above, we assess the overall probability of receiving a Second Request as moderate-to-high, estimated at approximately 40%–60%. This assessment reflects the following considerations:
The overlapping credit strategy businesses of Dunmore and Ridgemark, combined with the private equity platform-building dynamic, elevate the risk of a Second Request beyond what the market share figures alone would suggest. The current enforcement environment — characterized by heightened FTC scrutiny of financial services consolidation and private equity acquisitions — further increases the probability.
At the same time, the relatively moderate combined market share (14%–18%), the availability of strong arguments for a broader market definition, and the fragmented nature of the competitive landscape provide meaningful counterweights that reduce the probability below levels that would be associated with a truly high-risk transaction.
We note that the FTC (rather than the DOJ) is likely to receive clearance for this transaction through the interagency clearance process, given the transaction's focus on financial services and asset management — an area that falls primarily within the FTC's traditional purview. The FTC's Bureau of Competition, Mergers IV Division, which handles financial services transactions, would likely be the reviewing division. We have experience working with the staff in Mergers IV and believe we can engage productively with them if a Second Request is issued.
VII. Recommendation Regarding Early Termination
Based on our assessment of the antitrust risks associated with the proposed transaction, we recommend that the parties not request early termination of the initial 30-day HSR waiting period. This recommendation is based on the following considerations:
(a) signaling risk. Requesting early termination when identifiable competitive overlaps exist can signal to FTC staff that the filing parties do not anticipate scrutiny, potentially inviting closer review and staff annoyance. FTC staff members who receive an early termination request routinely review the filing for competitive overlaps, and a request accompanied by a filing that discloses significant horizontal overlap may be perceived as indicating that the parties have not adequately assessed the competitive implications of their transaction — or, worse, that they are attempting to minimize those implications. In our experience, this dynamic can accelerate staff escalation and increase the likelihood of a Second Request.
(b) Unlikelihood of grant. Given the moderate-to-high probability of a Second Request that we have assessed, early termination is unlikely to be granted. The FTC rarely grants early termination in transactions that present identifiable horizontal overlaps warranting further investigation. Filing an early termination request that is subsequently denied provides no benefit to the parties and may consume staff attention that could otherwise be directed toward resolving questions about the transaction informally.
(c) Strategic use of waiting period. The parties should use the full 30-day waiting period to prepare for a possible Second Request. This preparation includes identification of custodians whose files would be subject to a Second Request, implementation of document preservation protocols, development of a compliance plan for Second Request response, and preparation of advocacy materials (including a white paper on relevant market definition and competitive dynamics) that could be deployed in discussions with FTC staff. Beginning this preparation during the initial waiting period, rather than after a Second Request issues, will reduce the time and cost of compliance if a Second Request is received.
We understand that the deal team anticipated the potential for a Second Request given the overlapping credit strategies of Dunmore and Ridgemark, and we believe that this anticipation is well-founded. The recommendation not to request early termination is consistent with the prudent approach of allowing the full initial waiting period to elapse while using that time productively.
If, contrary to our expectations, the FTC does not issue a Second Request during the initial 30-day waiting period, the waiting period will expire on July 18, 2024, and the parties will be free to consummate the transaction thereafter, subject to satisfaction of all other closing conditions under the MIPA.
VIII. Item 4(c) and 4(d) Document Considerations
The HSR Notification and Report Form requires the production of certain categories of documents as part of the filing. Two categories of particular significance are:
Item 4(c) documents are documents that were prepared by or for any officer or director of the filing person (or, in the case of unincorporated entities, equivalent individuals) for the purpose of evaluating or analyzing the acquisition with respect to market shares, competition, competitors, markets, potential for sales growth, or expansion into product or geographic markets. This category includes investment committee memoranda, board presentations, strategic analyses, competitive positioning studies, and similar documents that discuss the competitive implications of the transaction.
Item 4(d) documents include confidential information memoranda ("CIMs"), banker presentations, management presentations, board materials, and similar documents prepared by or on behalf of the parties in connection with the transaction. These materials typically include descriptions of the target's business, competitive positioning, market share, and growth opportunities.
In the context of the proposed transaction, we are particularly concerned about the following categories of documents that may be responsive to the Item 4(c) and 4(d) requirements:
• Investment committee memoranda and presentations prepared by the HPE Fund IV deal team (including Marcus Hale and Diane Ochoa) analyzing the Ridgemark acquisition, to the extent such documents discuss competitive overlap between Dunmore and Ridgemark, combined market share in alternative credit SMAs, or the strategic rationale for the transaction in terms of competitive positioning.
• Competitive landscape analyses or market mapping exercises prepared by Greycastle Partners LLC in connection with its advisory engagement, to the extent such documents identify Dunmore as a competitor to Ridgemark or estimate market share in the alternative credit SMA space.
• The confidential information memorandum prepared by Cairnstone Advisory Group LLC on behalf of Ridgemark, which likely contains descriptions of Ridgemark's competitive positioning, market share, and key competitors.
• Board or management presentations at Ridgemark discussing the transaction, competitive dynamics, or the firm's market position relative to Dunmore and other competitors.
• Any internal communications among HCM or HPE Fund IV personnel discussing the competitive overlap or synergies arising from combining Dunmore and Ridgemark under common ownership.
Documents referencing competitive overlap between Dunmore and Ridgemark, combined market share estimates, or competitive dynamics in the alternative credit SMA space will be of particular interest to FTC staff reviewing the HSR filing. Such documents may provide the evidentiary foundation for a decision to issue a Second Request, as they may be construed as admissions by the parties that the transaction raises competitive concerns.
Recommendation. We recommend that the document collection process for Item 4(c) and 4(d) materials be completed by June 14, 2024, four days prior to the target filing date. This will allow C&H sufficient time to review the collected documents for responsiveness, privilege, and strategic sensitivity before finalizing the HSR filing on June 18, 2024. Custodians at HCM, Dunmore Asset Management LLC, and Greycastle Partners LLC should be identified and instructed to collect and produce responsive materials promptly.
A separate, more detailed memorandum with specific Item 4(c) and 4(d) collection instructions — including custodian identification, search terms, date ranges, and production format requirements — is being prepared by Elliot Nguyen and Aaron Liu of C&H and will be circulated to Marcus Hale and Diane Ochoa in the coming days. That memorandum will also address coordination with Blackwell, Oakes & Hardin LLP regarding Ridgemark's own Item 4(c) and 4(d) collection process.
IX. Potential Remedies and Mitigation Strategies
A. If a Second Request Issues
In the event that the FTC issues a Second Request, we recommend the following approach:
Prompt engagement with FTC staff. We would seek to engage promptly with the FTC's Bureau of Competition, Mergers IV Division staff to discuss the transaction, understand the staff's competitive concerns, and explore opportunities to narrow the scope of the Second Request. In our experience, early and constructive engagement with staff can significantly reduce the burden and duration of the Second Request process, and can help focus the investigation on the issues that are most relevant to the agency's competitive analysis.
Market definition advocacy. A central element of our engagement strategy would be to present arguments for a broader relevant market definition — specifically, a market encompassing all credit-focused SMAs, or all alternative investment strategies, offered to institutional investors — that would reduce the combined share of Dunmore and Ridgemark well below levels of competitive concern. We would prepare and submit a detailed advocacy submission (a "white paper") supported by economic analysis and empirical evidence demonstrating demand-side substitutability across credit strategies and supply-side substitutability across investment vehicles.
Emphasis on competitive differentiation. We would also emphasize the differentiation between Dunmore's and Ridgemark's respective investment strategies, client bases, and organizational capabilities. As noted above, the two firms employ different approaches within the broad alternative credit space, serve partially non-overlapping client bases, and maintain distinct relationships with investment consultants. These differences reduce the degree of head-to-head competition between the two firms and mitigate the potential for competitive harm from common ownership.
Economic analyses and industry expert submissions. We would engage an economist, likely from a recognized economic consulting firm with expertise in financial services markets, to prepare quantitative analyses supporting our market definition and competitive effects arguments. These analyses could include demand-side substitution analysis, critical loss analysis, and econometric modeling of competitive dynamics in the SMA market. We would also consider submitting declarations or reports from industry experts — such as investment consultants or institutional investor representatives — attesting to the breadth and competitiveness of the alternative credit SMA market.
B. Potential Structural or Behavioral Remedies
In the event that the FTC identifies a competition concern that cannot be resolved through market definition arguments or competitive effects analysis, the parties should be prepared to consider potential remedies. Based on our experience with FTC merger remedies and our assessment of the competitive landscape, the most likely remedies, if any were required, could include:
(i) Divestiture of a portion of one platform's alternative credit SMA business. The FTC could require the divestiture of a subset of SMA client accounts or a discrete investment team from either Dunmore or Ridgemark to a third-party buyer. Such a divestiture would be designed to maintain the pre-merger level of competition in the narrowly defined market. We note, however, that SMA divestitures in the asset management context present significant practical challenges, including the need for client consent, the risk of client attrition, and the difficulty of identifying a suitable buyer with the operational and investment capabilities to absorb the divested business.
(ii) Behavioral commitments. The FTC could seek behavioral remedies, such as requirements that Dunmore and Ridgemark maintain firewall protections between their respective investment teams, prohibiting the sharing of competitively sensitive information (e.g., pricing, client pipeline, and investment strategies). While the FTC has historically disfavored behavioral remedies in merger cases — preferring structural remedies that do not require ongoing monitoring — behavioral commitments may be more acceptable in the asset management context, where the regulated nature of the industry and existing compliance infrastructure provide a framework for monitoring and enforcement.
At this stage, based on our assessment of the combined market share (14%–18% under the narrow definition), the availability of strong market definition arguments, and the limited precedent for FTC enforcement in this space, we do not believe that a remedy will be necessary to obtain clearance. However, we recommend that the possibility of a remedy be considered in transaction planning and that the MIPA's provisions regarding regulatory conditions and remedies be reviewed to ensure that the parties have appropriate flexibility in the event that a remedy discussion becomes necessary. In particular, we note that the definition of "Burdensome Condition" in the MIPA — which typically governs the buyer's obligation to accept divestitures or other remedies as a condition to closing — should be reviewed by deal counsel to confirm that it provides appropriate protections for HPE Fund IV.
X. Impact on Transaction Timeline and MIPA Provisions
The proposed transaction's MIPA includes a regulatory closing condition requiring HSR clearance — defined as expiration or early termination of the applicable waiting period under the HSR Act, or receipt of affirmative clearance from the FTC or DOJ, as applicable. Until this condition is satisfied, the transaction cannot be consummated.
Under the expected timeline, if no Second Request is issued, the initial 30-day waiting period would expire on July 18, 2024, and the transaction could close shortly thereafter, subject to satisfaction of all other closing conditions.
However, if a Second Request is issued, the initial 30-day waiting period is tolled upon issuance of the Second Request. A new 30-day waiting period begins only upon the certification of substantial compliance with the Second Request by both the Acquiring Person and the Acquired Person. As a practical matter, the process of complying with a Second Request — which typically involves the collection, review, and production of large volumes of documents from multiple custodians, as well as the preparation and submission of interrogatory responses and data — can take several months. Based on our experience with Second Requests in comparable financial services transactions, we estimate that a Second Request could extend the regulatory clearance timeline by approximately three to six months from the date of issuance, depending on the scope of the request, the volume of responsive documents, and the pace of engagement with FTC staff.
A Second Request would also significantly increase the legal and professional costs associated with the transaction. In our experience, Second Request compliance costs in transactions of this size and complexity can range from approximately $3 million to $8 million or more in outside legal fees, document review costs, and economic consulting expenses, depending on the scope and duration of the investigation.
In light of these potential impacts, we recommend that deal counsel review the following provisions of the MIPA in coordination with C&H:
• Outside date / drop-dead date. The MIPA's outside date — the date after which either party may terminate the agreement if the closing has not occurred — should provide adequate runway to accommodate the potential delay associated with a Second Request. If the outside date does not provide at least six months from the date of filing, the parties should consider whether an extension mechanism is available under the MIPA or whether an amendment may be necessary.
• Termination provisions. The MIPA's termination provisions should be reviewed to confirm the allocation of risk in the event that HSR clearance cannot be obtained. In particular, the buyer's ability to terminate the agreement in the event of a protracted regulatory process, and the seller's remedies in such event, should be clearly understood by all parties.
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