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

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PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT

MEMORANDUM

From: Howard Bellamy, Partner, and Elliot Nguyen, Associate — Antitrust & Competition Group, Calderwood & Harkness LLP, 425 Lexington Avenue, New York, NY 10017

To: Gavin Trask, Managing Partner & Chairman, and Diane Ochoa, Partner, Head of Financial Services Investments — Harrowgate Capital Management LLC, 1200 North Market Street, Suite 1400, Wilmington, DE 19801

Date: July 19, 2024

Re: FTC Second Request — Initial Analysis and Recommended Compliance Strategy; Proposed Acquisition of Ridgemark Capital Advisors, LLC by Harrowgate Private Equity Fund IV, L.P.

Matter No.: 1003-00001

FTC Transaction No.: 2418-7603

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I. Executive Summary

The purpose of this memorandum is to analyze the Second Request issued by the Federal Trade Commission ("FTC") on July 16, 2024, and to recommend a comprehensive compliance strategy for Harrowgate Capital Management LLC ("HCM"), in its capacity as the Ultimate Parent Entity of Harrowgate Private Equity Fund IV, L.P. ("HPE Fund IV"), in connection with HPE Fund IV's proposed acquisition of 100% of the outstanding membership interests of Ridgemark Capital Advisors, LLC ("Ridgemark" or "RCA").

As you are aware, HSR Notification and Report Forms were filed on June 18, 2024, by both the Acquiring Person and the Acquired Person pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (15 U.S.C. § 18a) (the "HSR Act"), and the implementing rules promulgated thereunder at 16 C.F.R. Parts 801–803. The filings were made in connection with HPE Fund IV's proposed acquisition of 100% of the outstanding membership interests of Ridgemark, as contemplated by the Membership Interest Purchase Agreement dated June 4, 2024 (the "MIPA"). The FTC acknowledged receipt of both filings on June 21, 2024, and clearance for antitrust review of the proposed transaction was assigned to the FTC rather than the United States Department of Justice Antitrust Division ("DOJ"), consistent with the FTC's historical jurisdiction over transactions in the financial services and asset management sectors.

The initial 30-day statutory waiting period under the HSR Act was set to expire on July 18, 2024. However, on July 8, 2024, the FTC's Bureau of Competition, Mergers IV Division issued a voluntary access letter to Calderwood & Harkness LLP ("C&H") requesting additional documents responsive to Items 4(c) and 4(d) of the HSR Notification and Report Form, specifically requesting supplemental production of certain board presentations and internal strategy documents relating to the competitive landscape in alternative credit investment management. We produced 23 supplemental documents on July 10, 2024, in response to that voluntary access letter.

On July 16, 2024 — two days before the expiration of the initial waiting period — the FTC issued a formal Second Request (sometimes referred to as a "Request for Additional Information and Documentary Material") to both the Acquiring Person and the Acquired Person, pursuant to 15 U.S.C. § 18a(e)(1)(A) and 16 C.F.R. § 803.20. The issuance of the Second Request has the effect of tolling the statutory waiting period indefinitely until 30 days after the date on which both the Acquiring Person and the Acquired Person have certified substantial compliance with the Second Request.

The proposed transaction has a total enterprise value of approximately $370 million, with an equity purchase price of approximately $328 million (calculated as $370 million in total enterprise value minus approximately $42 million in net funded debt as of the anticipated closing date). The transaction is governed by the MIPA, which was executed on June 4, 2024, by and among HPE Fund IV, as Buyer, Ridgemark Capital Advisors, LLC, Jonathan Kessler, Priya Narayanan, the other individual members identified therein, and Thornfield Growth Partners, LLC, as Sellers.

This memorandum is organized to accomplish the following objectives: (a) summarize the Second Request's document specifications and interrogatories, including the scope and burden of the compliance obligation; (b) identify the FTC's primary competitive concerns as articulated in the Second Request and the accompanying cover letter from FTC staff; (c) recommend a compliance strategy, including custodian identification, document review methodology, interrogatory response preparation, timeline, and scope negotiation; and (d) discuss the implications of the Second Request for the MIPA's regulatory closing condition and outside date, including the reverse termination fee.

We note that early termination of the HSR Act waiting period was not requested by the parties in connection with the June 18, 2024 filing. This decision was consistent with our prior recommendation in the antitrust risk assessment memorandum dated June 10, 2024, in which we advised that an early termination request was inadvisable given the anticipated potential for heightened FTC scrutiny arising from the competitive overlaps between Ridgemark and Dunmore Asset Management LLC ("Dunmore"), an existing portfolio company of HPE Fund IV. A request for early termination, which would have been published in the Federal Register, would have prematurely signaled the transaction to competitors and market participants without any meaningful prospect of accelerating clearance.

Finally, we address in this memorandum our recommended strategy for the upcoming meeting with FTC Mergers IV Division staff, which is currently scheduled for July 22, 2024. That meeting will be a critical opportunity to engage constructively with staff, present our preliminary market definition arguments, and negotiate meaningful limitations on the scope of the Second Request. A separate, more detailed meeting preparation memorandum will be circulated prior to the July 22 session.

II. Background

A. Transaction Overview

Harrowgate Private Equity Fund IV, L.P. HPE Fund IV is a Delaware limited partnership with a total committed capital base of approximately $6.2 billion, having held its final close in December 2023. HPE Fund IV is managed by its general partner, Harrowgate Capital Management LLC, a Delaware limited liability company that serves as the Ultimate Parent Entity for purposes of HSR Act compliance. HCM's principal offices are located at 1200 North Market Street, Suite 1400, Wilmington, DE 19801. HPE Fund IV's investment strategy is focused on middle-market acquisitions in the financial services and asset management sectors, with a particular emphasis on platform acquisitions and subsequent add-on investments designed to build scale in specialized investment management verticals. HPE Fund IV's investment thesis centers on acquiring firms with differentiated investment capabilities, strong client relationships, and demonstrable organic growth potential, with the goal of building diversified multi-strategy investment management platforms.

The key principals at HCM responsible for the proposed Ridgemark acquisition are Gavin Trask, Managing Partner and Chairman, who serves as the senior decision-maker for HPE Fund IV's investment committee; Diane Ochoa, Partner and Head of Financial Services Investments, who leads the deal team and is the primary commercial sponsor of the transaction; and Marcus Hale, Vice President, Deal Execution, who has served as the day-to-day deal lead throughout the negotiation, due diligence, and regulatory filing processes.

Ridgemark Capital Advisors, LLC. Ridgemark is a Delaware limited liability company and an SEC-registered investment adviser (CRD No. 298174). Ridgemark is headquartered at 600 Boylston Street, Suite 3200, Boston, MA 02116, and employs approximately 112 individuals, including approximately 38 investment professionals. Ridgemark's assets under management ("AUM") totaled approximately $4.7 billion as of March 31, 2024, the most recently reported date. For the trailing twelve months ended March 31, 2024, Ridgemark generated total revenue of approximately $58.3 million, consisting of management fees of approximately $51.1 million and performance/incentive fees of approximately $7.2 million. Ridgemark's trailing twelve-month EBITDA for the same period was approximately $16.8 million, representing an EBITDA margin of approximately 28.8%.

Ridgemark's core business lines include: (i) separately managed accounts ("SMAs") for institutional investors, including pension funds, endowments, foundations, and insurance companies; (ii) alternative credit strategies, including private credit, structured credit (CLOs, CMBS, and ABS), and distressed/event-driven investing; and (iii) sub-advisory services for mutual fund complexes, pursuant to which Ridgemark manages alternative credit portfolios as sub-adviser to registered mutual fund sponsors.

Prior to the proposed transaction, Ridgemark's equity ownership is held as follows: Jonathan Kessler (Founder & CEO), approximately 38%; Priya Narayanan (COO), approximately 12%; other employee partners, approximately 20% in the aggregate; and Thornfield Growth Partners, LLC ("Thornfield"), a growth equity fund, approximately 30%. Thornfield acquired its stake in Ridgemark in 2019 and has been seeking an exit for approximately the past eighteen months.

Under the post-closing structure contemplated by the MIPA, Kessler and Narayanan will each retain approximately 10% rollover equity in the surviving entity, aligning their interests with HPE Fund IV and facilitating management continuity during the post-acquisition transition period. Thornfield will receive a full cash exit at closing, with expected proceeds of approximately $98.4 million (calculated as 30% of the $328 million equity purchase price, subject to customary closing adjustments for working capital, indebtedness, transaction expenses, and any other adjustments specified in the MIPA). The employee partners holding the remaining 20% will receive a combination of cash consideration and rollover equity, with the precise allocation to be determined in accordance with the individual equity participation agreements referenced in the MIPA.

Transaction Advisors. The financial advisor to Harrowgate in connection with the proposed transaction is Greycastle Partners LLC, with Mitchell Avery, Managing Director, serving as the lead banker. The financial advisor to Ridgemark is Cairnstone Advisory Group LLC, with Laura Feng, Managing Director, serving as the lead adviser. Debt financing for the proposed transaction will be provided under a $280 million senior secured credit facility from Meridian National Bank, N.A., pursuant to a commitment letter dated June 3, 2024 (Gerald Statham, Senior Vice President, Sponsor Finance, serves as the lead financing contact). Target's counsel in the transaction is Blackwell, Oakes & Hardin LLP, with Catherine Oakes serving as lead M&A counsel and Rajesh Subramaniam serving as antitrust counsel. Thornfield's counsel is Lyle & Pennington LLP, with Thomas Pennington III serving as lead partner for the selling sponsor.

B. The Competitive Overlap: Dunmore Asset Management LLC

The competitive concern animating the FTC's scrutiny of the proposed transaction arises from the horizontal overlap between Ridgemark and Dunmore Asset Management LLC ("Dunmore"), an existing portfolio company within HPE Fund IV's investment portfolio. A thorough understanding of Dunmore's business and its degree of competitive overlap with Ridgemark is essential to framing our compliance and advocacy strategy.

Dunmore Asset Management LLC is a Delaware limited liability company and SEC-registered investment adviser headquartered at 227 West Monroe Street, Suite 4100, Chicago, IL 60606. HPE Fund IV acquired Dunmore in the second quarter of 2023 as a platform investment in the alternative credit investment management space. Franklin Broussard serves as Dunmore's Chief Executive Officer. Dunmore's AUM totals approximately $3.9 billion as of the most recent reporting date. Critically, Dunmore manages approximately $2.1 billion in alternative credit separately managed accounts for U.S. institutional clients, a business line that directly overlaps with Ridgemark's alternative credit SMA offering. Ridgemark, for its part, manages approximately $1.4 billion in alternative credit SMAs for U.S. institutional clients.

Both Dunmore and Ridgemark are classified under NAICS code 523920 (Portfolio Management) for their core business activities. Ridgemark is additionally coded under NAICS code 523910 (Miscellaneous Intermediation) to reflect certain of its sub-advisory and intermediary activities.

The horizontal overlap between Dunmore and Ridgemark in alternative credit separately managed accounts for institutional investors, and to a lesser extent in sub-advisory services for alternative credit mutual funds, is the core driver of the FTC's decision to issue the Second Request. The combined alternative credit SMA AUM of the two firms — approximately $3.5 billion — represents a meaningful share of the narrowly defined relevant market that the FTC staff appears to be evaluating, as discussed in greater detail in Section III.D and Section IV below.

C. HSR Filing and Procedural History

The HSR Notification and Report Forms were filed on June 18, 2024, by both the Acquiring Person (HCM, as Ultimate Parent Entity of HPE Fund IV) and the Acquired Person (Ridgemark), pursuant to the requirements of the HSR Act, 15 U.S.C. § 18a, and the implementing rules at 16 C.F.R. Parts 801–803. The filing was required because the proposed transaction satisfied both the size-of-transaction test and the size-of-persons test under the 2024 HSR Act jurisdictional thresholds, as adjusted by the FTC's annual revisions effective February 27, 2024.

With respect to the size-of-transaction test, the total enterprise value of the proposed transaction ($370 million) exceeds the 2024 jurisdictional threshold of $119.5 million, thereby satisfying the first prong of the HSR Act's notification requirements. With respect to the size-of-persons test, HCM's total assets across all managed funds and entities exceed $23.9 billion (well in excess of the $239 million threshold for the larger person), and Ridgemark's total assets of approximately $87 million (excluding client AUM, which is not attributable to Ridgemark for HSR purposes) exceed the $23.9 million threshold for the smaller person. Both prongs of the size-of-persons test were therefore satisfied. The applicable HSR Act filing fee was $160,000, calculated based on the transaction value falling within the $173.3 million to $536.4 million band under the 2024 filing fee schedule as revised by the Merger Filing Fee Modernization Act of 2022.

The FTC acknowledged receipt of both HSR filings on June 21, 2024, and clearance for antitrust review was assigned to the FTC (rather than the DOJ Antitrust Division), consistent with the interagency clearance process and the FTC's traditional jurisdiction over financial services and asset management transactions. As noted above, early termination of the initial waiting period was not requested by either party, consistent with our June 10, 2024 recommendation.

The relevant procedural timeline is as follows:

• June 4, 2024: Execution of the Membership Interest Purchase Agreement.

• June 18, 2024: Filing of HSR Notification and Report Forms by both the Acquiring Person and the Acquired Person.

• June 21, 2024: FTC acknowledgment of receipt; clearance assigned to the FTC.

• July 8, 2024: FTC Bureau of Competition, Mergers IV Division issued a voluntary access letter requesting additional documents responsive to Items 4(c) and 4(d) of the HSR Notification and Report Form, focusing on board presentations and internal strategy documents relating to the competitive landscape in alternative credit investment management.

• July 10, 2024: Calderwood & Harkness produced 23 supplemental Item 4 documents responsive to the voluntary access letter.

• July 16, 2024: FTC issued the Second Request to both the Acquiring Person and the Acquired Person, tolling the initial waiting period.

• July 18, 2024: The initial 30-day statutory waiting period expired, although the expiration was rendered moot by the issuance of the Second Request two days prior, which tolled the waiting period pending substantial compliance.

III. Summary of the Second Request

A. Overview and Statutory Framework

A Second Request is a formal demand for additional information and documentary material issued by the FTC (or the DOJ Antitrust Division, as applicable) pursuant to Section 7A(e) of the Clayton Act, 15 U.S.C. § 18a(e), and 16 C.F.R. § 803.20. The issuance of a Second Request is the principal mechanism by which the antitrust enforcement agencies extend their review of a proposed transaction beyond the initial 30-day statutory waiting period. The legal effect of a Second Request is to toll the statutory waiting period until 30 days after both the Acquiring Person and the Acquired Person have substantially complied with the request. In the case of a cash tender offer or certain other acquisition types specified in the statute, the post-compliance waiting period is 10 days rather than 30 days; however, because the proposed transaction is structured as a direct purchase of membership interests pursuant to the MIPA and does not involve a tender offer, the standard 30-day post-compliance waiting period applies.

The Second Request in this matter is addressed to Harrowgate Capital Management LLC, as Ultimate Parent Entity of the Acquiring Person (Harrowgate Private Equity Fund IV, L.P.), and was issued separately to Ridgemark Capital Advisors, LLC, as the Acquired Person. The request was issued by the FTC's Bureau of Competition, Mergers IV Division, under the signature of the Division's Assistant Director. Both the Acquiring Person and the Acquired Person are independently obligated to comply with the Second Request, and the statutory waiting period will not recommence until both parties have certified substantial compliance.

It is important to note that the standard for compliance with a Second Request is "substantial compliance," not perfect or complete compliance. The FTC's Premerger Notification Office has historically interpreted substantial compliance to mean that the responding party has made a good-faith effort to produce all responsive documents and data and has completed the production to the extent reasonably practicable. Nevertheless, the FTC retains discretion to challenge a certification of substantial compliance if it believes the production is materially deficient, and any such dispute could further delay the transaction. Accordingly, our compliance strategy must be thorough and well-documented.

B. Document Specifications

The Second Request contains detailed document specifications that define the categories of documents and communications that must be collected, reviewed for relevance and privilege, and produced to the FTC. We summarize the key elements of the document specifications below.

Custodians. The Second Request identifies categories of persons whose files must be searched and whose documents must be collected for review and potential production. Specifically, the request requires production of documents from the files of all officers, directors, and employees of the Acquiring Person (including HCM and its affiliates, expressly including Dunmore Asset Management LLC) with responsibilities related to any of the following areas:

(i) the proposed acquisition of Ridgemark, including any aspect of the negotiation, evaluation, due diligence, or approval process;

(ii) alternative credit investment strategies, including private credit, structured credit, and distressed/event-driven strategies;

(iii) separately managed account business development, client relationship management, and marketing activities directed at institutional investors;

(iv) sub-advisory services for mutual fund complexes, including alternative credit sub-advisory mandates;

(v) competitive strategy, pricing, fee analysis, and market analysis relating to alternative credit investment management services; and

(vi) integration planning for the proposed combination of Ridgemark and Dunmore or any other post-closing operational changes contemplated in connection with the proposed transaction.

Date Range. The Second Request specifies a document collection date range of January 1, 2021 through the date of full compliance with the Second Request. This represents a collection window of approximately three and a half years at the outset, which will extend further depending on the length of the compliance process. The breadth of the date range is consistent with recent FTC practice in merger investigations, which has trended toward longer look-back periods in order to capture multi-year competitive trends, strategic planning cycles, and historical bidding and client data.

Document Types. The Second Request requires production of all documents and communications within the scope of the defined specifications, without limitation as to format or medium. This includes, but is not limited to, emails, instant messages (including messages exchanged via platforms such as Northgate Data Systems, Meridian Solutions, Westmark Services Inc. IB, and similar messaging applications), presentations (including Northgate Services Inc. and similar formats), reports, analyses, spreadsheets, meeting minutes, board materials, investment committee memoranda, client correspondence, and any other documents or communications, whether in electronic or hard-copy form, that are responsive to the defined specifications.

Key Specification Categories. The Second Request organizes its document demands into several thematic categories, which we summarize as follows:

(i) Competition in Alternative Credit SMAs. Documents and communications relating to competition, competitive conditions, competitive positioning, market shares, or competitive dynamics in the provision of separately managed account services focused on alternative credit strategies (including private credit, structured credit, CLOs, CMBS, ABS, distressed debt, and event-driven strategies) for U.S. institutional investors.

(ii) Sub-Advisory Services. Documents and communications relating to competition, competitive conditions, or competitive dynamics in the provision of sub-advisory services for alternative credit mutual funds, including any analysis of the market for sub-advisory mandates, competitive pitch situations, or strategic assessments of sub-advisory opportunities.

(iii) Transaction-Related Documents. Documents and communications relating to the proposed transaction, including the strategic rationale, anticipated synergies, integration plans, competitive implications, due diligence materials, board and investment committee presentations, and any analyses prepared by or for the parties or their financial advisors relating to the expected competitive effects of the transaction.

(iv) Market Definition and Market Share. Documents and communications relating to market definition, market share estimation, market sizing, or total addressable market analysis for alternative credit investment management services, whether prepared internally or by third-party consultants, industry groups, or financial advisors.

(v) Customers, Pricing, and Fee Arrangements. Documents and communications relating to the identification of customers for alternative credit SMA and sub-advisory services, including fee schedules, fee negotiation correspondence, pricing policies, and any analysis of customer switching costs or customer alternatives.

(vi) Dunmore-Specific Documents. Documents and communications relating to Dunmore Asset Management LLC's alternative credit business, competitive positioning, client relationships, investment strategies, and any assessments of competitive overlap or complementarity between Dunmore and Ridgemark.

Privilege Log Requirement. The Second Request requires that a detailed privilege log be prepared and submitted for all documents withheld from production on the basis of attorney-client privilege, work product protection, or any other applicable privilege or protection. The privilege log must identify each withheld document by date, author, recipient(s), general subject matter, and the specific basis for the privilege claim. This requirement is standard in Second Request practice but is worth highlighting because the volume of privileged communications in a transaction of this nature — particularly board-level communications, investment committee discussions, and counsel-advised strategic analyses — can be significant, and the preparation of a compliant privilege log is itself a substantial undertaking.

C. Interrogatory Specifications

In addition to the document specifications described above, the Second Request includes a set of approximately 20 to 25 interrogatories requiring detailed narrative responses, data compilations, and structured data submissions. These interrogatories are designed to elicit factual information that may not be fully captured in the document production, and to require the responding party to organize and present data in formats that facilitate the FTC staff's competitive analysis.

The key interrogatory topics include the following:

Client and Account Data. Identification of all alternative credit SMA accounts managed by Ridgemark and Dunmore, respectively, including for each account the client name, current AUM, investment strategy (e.g., private credit, structured credit, distressed), management fee rate (expressed as a percentage of AUM), performance/incentive fee rate (if applicable), and inception date. This interrogatory is designed to enable FTC staff to construct a comprehensive picture of the parties' institutional client bases and to identify any client overlap.

Revenue and AUM Disaggregation. Revenue and AUM data for Ridgemark and Dunmore, broken out by product type (separately managed accounts, sub-advisory mandates, commingled funds, and any other product categories), for each of the last three fiscal years (2021, 2022, and 2023) and year-to-date 2024. This data will enable the FTC to assess trends in the parties' relative market positions and to evaluate the magnitude of the competitive overlap across different product lines.

Competitive Pitch and "Beauty Contest" Data. Identification of all competitive pitch situations (sometimes referred to as "beauty contests" or "bake-offs") for alternative credit SMA mandates in which either Ridgemark or Dunmore participated during the last three years. For each such pitch, the interrogatory requires identification of the prospective client, the other firms that competed for the mandate, the outcome (won/lost/pending), the proposed fee structure, the proposed investment strategy, and any available information regarding the fees or strategies proposed by competing firms.

Client Attrition Data. Identification of all clients that have terminated, reduced allocations to, or declined to renew alternative credit SMA mandates with Ridgemark or Dunmore during the last three years, together with an explanation of the reasons for each termination, reduction, or non-renewal, including whether the client moved assets to a competitor, reallocated to a different asset class, or made a change for other reasons.

Market Participants and Competitive Dynamics. A narrative description of the market participants, competitive landscape, barriers to entry, and competitive dynamics in the alternative credit SMA and sub-advisory segments, including identification of the firms that Ridgemark and Dunmore each consider to be their primary competitors.

Integration Planning. A detailed description of the planned post-closing integration of Ridgemark and Dunmore, including whether the parties intend to combine investment teams, consolidate client relationships, harmonize fee structures, integrate technology platforms, or make any other operational changes that would affect the competitive positioning of the combined entity.

Organizational and Personnel Data. Organizational charts for the alternative credit investment groups at both Ridgemark and Dunmore, together with employee data (name, title, function, compensation, and years of experience) for all investment professionals engaged in alternative credit strategies at either firm.

D. FTC's Identified Competitive Concerns

The Second Request and the accompanying cover letter from FTC Mergers IV Division staff articulate two primary areas of competitive concern that are driving the agency's investigation:

First, the FTC is concerned about the horizontal overlap in separately managed accounts focused on alternative credit strategies — including private credit, structured credit, and distressed debt — for U.S. institutional investors. The institutional client base at issue includes pension funds (both public and corporate), endowments, foundations, insurance companies, and other large asset owners that allocate capital to alternative credit strategies through SMA vehicles. The FTC staff's concern is that the combination of Dunmore's approximately $2.1 billion and Ridgemark's approximately $1.4 billion in alternative credit SMAs — a combined total of approximately $3.5 billion — would result in a meaningful increase in concentration in this segment, potentially reducing competition for institutional mandates and enabling the combined entity to exercise greater pricing power or reduce the quality of service provided to institutional clients.

Second, the FTC is concerned about the horizontal overlap in sub-advisory services for alternative credit mutual funds. Both Dunmore and Ridgemark provide sub-advisory services to registered mutual fund complexes, managing alternative credit portfolios on behalf of fund sponsors. The FTC staff appears to view the sub-advisory market as a related but potentially distinct segment in which the combination could reduce the number of available sub-advisory providers for fund sponsors seeking alternative credit capabilities.

Significantly, the FTC staff have estimated a combined market share of approximately 14% to 18% in the alternative credit SMA market for U.S. institutional clients, based on what appears to be a narrow relevant market definition. The narrow market definition employed by FTC staff appears to focus on three key parameters: (a) alternative credit strategies specifically, to the exclusion of traditional fixed income, equities, real estate, and other asset classes; (b) the SMA delivery vehicle specifically, to the exclusion of commingled funds, ETFs, interval funds, and other pooled investment vehicles; and (c) U.S. institutional clients specifically, to the exclusion of retail investors, high-net-worth individuals, and non-U.S. institutional investors.

Working from the FTC staff's estimated combined share of 14% to 18% and the combined Dunmore/Ridgemark alternative credit SMA AUM of approximately $3.5 billion, the implied total size of the narrowly defined market is approximately $19 billion to $25 billion. This range is broadly consistent with publicly available industry data on alternative credit SMA assets managed for U.S. institutional investors, although the precise market boundaries will be a central point of contention in our advocacy before FTC staff.

We note that the estimated combined share of 14% to 18% falls below the 25% to 30% threshold at which courts and enforcement agencies have historically found a presumption of competitive harm in horizontal merger cases, as articulated by the Supreme Court in United States v. Philadelphia National Bank, 374 U.S. 321 (1963), and as refined in subsequent case law and the FTC/DOJ 2023 Merger Guidelines. However, the FTC staff appears to be concerned about concentration dynamics specific to this specialized niche market, including the potential for coordinated effects among the remaining competitors and the risk that the transaction would eliminate particularly close competitors in a segment characterized by differentiated investment strategies and client relationships. The 2023 Merger Guidelines expressly recognize that competitive concerns may arise at concentration levels below the structural presumption threshold, particularly in markets with differentiated products, high barriers to switching, and a limited number of credible competitors.

IV. Assessment of Competitive Concerns

Having summarized the Second Request and the FTC staff's articulated concerns, we turn to an assessment of the substantive competitive merits. Our analysis supports the conclusion that the FTC's concerns, while not frivolous, are based on a narrow market definition that is vulnerable to challenge and on a combined market share that, even under the narrow definition, does not approach the levels at which enforcement action would be likely to succeed.

A. Arguments in Favor of a Broader Market Definition

The narrow market definition employed by FTC staff — alternative credit SMAs for U.S. institutional clients — is potentially overstated and does not reflect the competitive realities faced by institutional investors allocating capital to alternative credit strategies. Strong arguments exist for a broader relevant product market that would substantially reduce the combined Dunmore/Ridgemark market share.

Substitutability of Investment Vehicles. Alternative credit SMAs compete directly with commingled alternative credit funds, interval funds, and business development companies ("BDCs") for the same institutional capital allocations. Institutional investors routinely evaluate alternative credit investment opportunities across vehicle types, selecting the vehicle that best suits their liquidity needs, regulatory requirements, minimum investment thresholds, and governance preferences. The economic exposure and investment returns provided by a separately managed account are substantively identical to those provided by a commingled fund investing in the same strategies — the choice of vehicle is driven by operational and structural considerations, not by differences in the competitive dynamics of the underlying investment management service. Limiting the relevant market to SMAs alone artificially excludes close substitutes and overstates the parties' competitive significance.

Total-Portfolio Allocation Decisions. Many institutional clients — particularly large pension funds, endowments, and foundations — allocate capital to alternative credit on a total-portfolio basis, evaluating the alternative credit "sleeve" of their portfolio as a single allocation decision rather than making separate, vehicle-specific decisions. In this decision-making framework, an SMA offering competes directly with a commingled fund offering from the same or different manager, and the choice between vehicles is a second-order consideration. Substitution between SMAs and commingled funds is routine, and institutional consultants regularly present clients with a menu of options spanning both vehicle types.

Sub-Advisory Mandates as a Distinct Segment. To the extent the FTC staff collapses sub-advisory mandates for mutual fund complexes into the same market as direct SMA relationships with institutional investors, the resulting market definition overstates the combined share. Sub-advisory relationships are structurally distinct from direct SMA relationships: the client in a sub-advisory relationship is the mutual fund sponsor (which selects and oversees the sub-adviser), whereas the client in a direct SMA relationship is the institutional investor itself. The competitive dynamics, fee structures, contracting processes, and decision-makers differ materially between the two segments. If the sub-advisory segment is analyzed separately, the combined Dunmore/Ridgemark share in direct alternative credit SMAs alone may be somewhat lower than the 14% to 18% range estimated by the FTC staff.

Broader Market Share. Under a broader market definition encompassing all alternative credit products for institutional investors — including commingled funds, interval funds, BDCs, and other vehicles, in addition to SMAs — the combined Dunmore/Ridgemark share would fall well below 14%. Industry data from sources such as Tidewater Health IT, Bramwell Health IT, Ostrander Management Consulting, and the Investment Company Institute indicate that the total institutional alternative credit market (across all vehicles) exceeds $100 billion in AUM, which would place the combined Dunmore/Ridgemark share at approximately 3% to 4% — a level that would not raise competitive concerns under any analytical framework.

B. Distinct Competitive Characteristics of Dunmore vs. Ridgemark

Beyond market definition, the factual record should support the argument that Dunmore and Ridgemark are not particularly close competitors within the alternative credit space, reducing the likelihood that the transaction would meaningfully diminish competition.

Strategy Differentiation. Dunmore's alternative credit business is focused primarily on direct lending and middle-market private credit — that is, Dunmore originates and manages portfolios of privately negotiated loans to middle-market companies. Ridgemark's alternative credit business, by contrast, is weighted toward structured credit (including CLOs, CMBS, and ABS) and distressed/event-driven strategies. These are fundamentally different investment approaches, requiring different analytical capabilities, sourcing networks, and risk management frameworks. An institutional investor seeking exposure to direct lending is not typically considering Ridgemark as a close alternative, and vice versa.

Minimal Client Overlap. Preliminary analysis of the client rosters of both firms suggests that fewer than five institutional clients maintain active SMA relationships with both Dunmore and Ridgemark in alternative credit strategies. This limited overlap is consistent with the strategy differentiation described above — clients selecting a direct lending manager are making a different allocation decision than clients selecting a structured credit or distressed manager.

Geographic Concentration. Dunmore's institutional client base is concentrated in the Midwest and West Coast regions, reflecting Dunmore's Chicago headquarters and its historical business development focus. Ridgemark's institutional client base is concentrated in New England and the Mid-Atlantic region, reflecting its Boston headquarters and its longstanding relationships with pension funds, endowments, and insurance companies in those regions. While geographic concentration is not a traditional antitrust market-definition factor in investment management (where services are delivered nationally), the geographic pattern reinforces the conclusion that the two firms have developed largely independent client bases.

Different Portfolio Construction Approaches. Dunmore's direct lending portfolios are characterized by relatively concentrated positions in privately originated loans, with longer lock-up periods and limited secondary market liquidity. Ridgemark's structured credit and distressed portfolios are characterized by more diversified positions in publicly traded or semi-liquid instruments, with greater portfolio turnover and different risk/return profiles. The differing portfolio construction approaches and risk profiles further reduce the likelihood that the two firms are viewed by institutional clients as direct, head-to-head competitors.

C. Competitive Landscape and Ease of Entry

The alternative credit SMA market is populated by a large and growing number of competitors, ranging from large diversified asset managers with dedicated alternative credit platforms (such as Dunmore Asset Advisors, Harborview Investment Management, Ridgeline Investors, Pinnacle Asset Advisors, and Northgate Asset Advisors) to specialist credit managers (such as Fenmore Asset Management, Aldermere Capital Management, Westmark Investment Management, and Cornavel Partners) to bank-affiliated investment management platforms (such as Ridgeline Asset Management, Greaves Asset Management, and Harborline Asset Advisors). The breadth and depth of the competitive landscape undercuts any suggestion that the combination of Dunmore and Ridgemark would meaningfully reduce the options available to institutional investors.

Barriers to entry in the alternative credit SMA segment are moderate. Entry requires SEC registration as an investment adviser, development of a credible investment track record, establishment of compliance and risk management infrastructure, and the ability to attract and retain experienced investment professionals. However, these barriers are not insurmountable, and the market has seen significant new entry in recent years as the alternative credit sector has attracted substantial capital inflows. According to Tidewater Health IT data, the number of fund managers actively managing alternative credit strategies for institutional investors has grown by approximately 35% since 2020, driven by the secular shift of institutional capital from traditional fixed income to higher-yielding alternative credit strategies.

Recent industry trends show significant and accelerating capital inflows into private credit and structured credit, attracting new competitors and expanding the total market size. The Private Credit sector has been widely described in industry literature as one of the fastest-growing segments of institutional asset management, and the expansion of the addressable market reduces the competitive significance of any individual transaction.

D. Preliminary Conclusion on Substantive Risk

Based on the foregoing analysis, we assess the ultimate risk of an FTC enforcement action — whether in the form of a complaint seeking a preliminary or permanent injunction under Section 13(b) of the FTC Act, or a consent order requiring divestiture or other structural relief — as moderate, but manageable through the Second Request process.

The narrow market definition on which the FTC staff's preliminary analysis is based is vulnerable to challenge on multiple grounds, as outlined above. Under a broader and, we believe, more economically sound market definition, the combined Dunmore/Ridgemark share would not raise serious competitive concerns. Moreover, the factual differentiation between Dunmore's direct lending focus and Ridgemark's structured credit and distressed focus undermines the FTC's theory that the two firms are close competitors whose combination would meaningfully diminish competition.

However, we do not dismiss the FTC's concerns. The agency's decision to issue a Second Request — a resource-intensive step that the FTC does not undertake lightly — indicates that the staff has identified genuine questions about the competitive effects of the proposed transaction that it believes warrant further investigation. The issuance of a Second Request occurs in only approximately 2% to 4% of all HSR filings in a given year, and the decision to issue one reflects a considered judgment by staff attorneys and economists that the transaction merits deeper scrutiny.

We recommend engaging constructively with FTC staff to negotiate meaningful scope limitations on the Second Request and to present our market definition arguments at the earliest available opportunity — specifically, at the July 22, 2024 meeting. A well-prepared advocacy effort at this stage can shape the staff's analytical framework and potentially narrow the scope of the investigation, reducing both the cost and duration of the compliance process and improving the prospects for ultimate clearance.

V. Recommended Compliance Strategy

We outline below our recommended strategy for complying with the Second Request in a manner that is thorough, efficient, and strategically aligned with our advocacy objectives.

A. Custodian Identification and Prioritization

The first step in the compliance process is to identify the individuals whose files must be searched and whose documents must be collected for review. Based on our analysis of the Second Request's custodian specifications, we recommend the following custodian list:

Harrowgate Capital Management LLC Custodians:

• Gavin Trask, Managing Partner & Chairman — as the senior decision-maker and investment committee chair, Mr. Trask's files will contain transaction-related materials, strategic discussions regarding the alternative credit platform thesis, and communications with Diane Ochoa, Marcus Hale, and external advisors regarding the Ridgemark acquisition.

• Diane Ochoa, Partner, Head of Financial Services Investments — as the commercial sponsor and deal lead, Ms. Ochoa's files will contain extensive transaction-related materials, competitive analysis, due diligence findings, and communications with Ridgemark management.

• Marcus Hale, Vice President, Deal Execution — as the day-to-day deal lead, Mr. Hale's files will contain detailed operational materials, financial models, integration planning documents, and communications with financial and legal advisors.

• Any additional HCM personnel involved in the transaction or with responsibility for the alternative credit investment thesis, including any members of the investment committee who participated in the approval of the Ridgemark acquisition and any operating partners or value creation professionals who analyzed the alternative credit market.

Dunmore Asset Management LLC Custodians:

• Franklin Broussard, CEO — Mr. Broussard's files will contain strategic planning materials, competitive analyses, and communications with HPE Fund IV regarding the alternative credit business, including any discussions of the Ridgemark acquisition or potential competitive implications.

• Head of Alternative Credit Strategies — the individual leading Dunmore's alternative credit investment team, whose files will contain investment strategy documents, performance analyses, and communications regarding competitive positioning.

• Head of Business Development/Client Relations — the individual responsible for Dunmore's institutional client relationships and new business development activities, whose files will contain competitive pitch materials, client correspondence, and market intelligence.

• Portfolio Managers focused on Private Credit SMAs — individual portfolio managers whose files may contain client-specific communications, investment performance reports, and competitive intelligence relevant to the FTC's analysis.

Greycastle Partners LLC Custodians:

• Mitchell Avery, Managing Director — as the lead banker for the transaction, Mr. Avery's files will contain transaction-related presentations, competitive landscape analyses, market share data, and communications with Harrowgate regarding the strategic rationale for the acquisition.

• Any analyst or associate at Greycastle who prepared materials analyzing the competitive landscape, market shares, or strategic rationale in connection with the transaction — these individuals' files may contain the underlying data and work papers supporting the presentations and analyses delivered to Harrowgate.

Based on the foregoing, we estimate a total of 12 to 15 custodians across all three entities. We recommend prioritizing custodians with direct responsibility for alternative credit SMA strategies and transaction-related analysis for initial document collection and review, as these custodians' files are most likely to contain the "hot documents" that will drive the FTC staff's competitive analysis. Specifically, we recommend beginning collection from the files of Diane Ochoa, Marcus Hale, Franklin Broussard, and Mitchell Avery, and proceeding to the remaining custodians on a rolling basis.

B. Document Collection and Review Workflow

Date Range. Consistent with the Second Request's specification, the document collection date range will be January 1, 2021 through the date of full compliance with the Second Request. As noted above, this represents a collection window of more than three and a half years.

Estimated Document Universe. Based on our experience with comparable Second Request compliance efforts in the financial services sector, and taking into account the number of custodians and the length of the collection window, we estimate that the total document universe (prior to relevance review) will consist of approximately 350,000 to 500,000 documents across all custodians. This estimate includes emails, instant messages, documents stored on shared drives and document management systems, and any other electronic files responsive to the collection specifications. The actual volume may vary depending on the custodians' document retention practices, email volume, and use of messaging platforms.

E-discovery Vendor. We recommend engaging a qualified e-discovery vendor for data collection, processing, hosting, and technology-assisted review ("TAR") / predictive coding. We have worked successfully on prior Second Request matters with several leading vendors, including Lighthouse, Relativity, and Ashgrove Systems, and will recommend a specific vendor based on pricing, capacity, and prior experience with FTC Second Request productions. The selected vendor will be responsible for collecting data from custodians' email systems (including Strathmore Data Systems/Outlook and any other email platforms), instant messaging platforms (including Northgate Data Systems, Westmark Services Inc. IB, and any other messaging systems in use), shared network drives, and document management systems; processing the collected data to remove duplicates, system files, and non-responsive file types; and hosting the processed data on a review platform for use by the review team.

Review Protocol. We recommend a multi-phase review protocol designed to maximize efficiency while ensuring thoroughness and compliance:

First Pass — Technology-Assisted Review (TAR). We will use TAR / predictive coding to train a machine-learning model to identify documents likely to be responsive to the Second Request's specifications. This will involve an initial seed set review by experienced C&H attorneys to train the model, followed by iterative model refinement and validation. TAR has been widely accepted by courts and regulatory agencies, including the FTC, as an appropriate and defensible methodology for document review in Second Request proceedings. We expect TAR to significantly reduce the volume of documents requiring manual review, potentially by 50% to 70%.

Second Pass — Manual Relevance Review. Documents identified by the TAR model as likely responsive will be subject to manual review by trained reviewers (C&H associates and contract attorneys) to confirm responsiveness and code documents by issue, specification, and confidentiality designation. We will establish a detailed review protocol and coding manual prior to the commencement of review, and will conduct regular quality control checks throughout the process.

Third Pass — Privilege Review. All documents identified as responsive during the relevance review will be reviewed for attorney-client privilege, work product protection, and any other applicable privileges. Documents withheld from production on the basis of privilege will be logged on the privilege log in accordance with the Second Request's specifications. Privilege review will be conducted by C&H associates and partners to ensure consistency and accuracy of privilege determinations.

Fourth Pass — "Hot Document" Review. Documents identified during the review process as particularly sensitive or significant — including documents that discuss competitive dynamics, market shares, the transaction rationale, integration planning, or competitive concerns — will be escalated for review by C&H partners. We will prepare a "hot document" report summarizing the key documents and their potential significance for the FTC staff's competitive analysis. This report will inform our advocacy strategy and our preparation for any FTC staff interviews or depositions.

Coordination with Acquired Person's Counsel. We will coordinate closely with Blackwell, Oakes & Hardin LLP (Rajesh Subramaniam) on the Acquired Person's parallel compliance effort. Coordination is important for several reasons: (i) to ensure consistency in approach, including custodian identification, search methodology, and coding protocols; (ii) to avoid duplicative production of documents held by both parties; (iii) to coordinate privilege determinations on joint-privilege communications; and (iv) to present a unified and coherent factual narrative to the FTC staff. We anticipate regular working-level calls between the C&H and Blackwell, Oakes teams throughout the compliance process.

C. Data Compilation for Interrogatory Responses

Compliance with the Second Request's interrogatory specifications will require the compilation of structured data sets and the preparation of detailed narrative responses. This effort will involve significant coordination across Harrowgate, Dunmore, and Ridgemark.

Structured Data Sets. We will coordinate with the operational and finance teams at Harrowgate, Dunmore, and Ridgemark to compile the following data sets, among others:

• Complete client lists for alternative credit SMA accounts at both Dunmore and Ridgemark, including client name, AUM, strategy type, fee rate, and inception date;

• Revenue and AUM data disaggregated by product type (SMA, sub-advisory, commingled fund, other) for each of the fiscal years 2021, 2022, and 2023, and year-to-date 2024;

• Competitive pitch/beauty contest logs for alternative credit SMA mandates over the past three years, including identification of the prospective client, competing firms, outcome, and fee proposals;

• Client termination and attrition data, including identification of all clients that have terminated, reduced, or not renewed alternative credit SMA mandates during the past three years, with reasons for each departure;

• Fee schedules and fee negotiation history for representative alternative credit SMA accounts;

• Organizational charts and employee rosters for the alternative credit investment teams at both Dunmore and Ridgemark.

Financial Data Verification. We recommend engaging the parties' respective independent auditors — Pallister & Greaves Bramwell CPAs LLP (Harrowgate/Dunmore) and Ashfield, Stroval & Co. LLP (Ridgemark) — as needed to verify the accuracy and completeness of the financial data included in the interrogatory responses. While auditor involvement is not required by the Second Request, the use of verified financial data will enhance the credibility of our submissions and reduce the risk of FTC staff challenges to the accuracy of our data.

Narrative Responses. We will draft detailed narrative responses to the interrogatories addressing competitive dynamics, market participants, barriers to entry, and the competitive landscape in the alternative credit SMA and sub-advisory segments. These narratives will be an important advocacy tool, and we will draft them to present our market definition arguments and competitive analysis in the most favorable light, while remaining accurate and complete. All narrative responses will be reviewed and approved by the deal team prior to submission.

Integration Planning Interrogatory. The interrogatory regarding post-closing integration plans warrants particular care. Our response must be consistent with the MIPA's representations and warranties, the parties' pre-closing conduct obligations (including gun-jumping restrictions), and the commercial plans that the deal team has developed. We will coordinate closely with Diane Ochoa, Marcus Hale, and the broader deal team to ensure that the integration planning narrative presented to the FTC is both accurate and consistent with the parties' other communications regarding the transaction.

D. Estimated Timeline for Substantial Compliance

Assuming that compliance efforts commence in earnest in late July 2024 (following the July 22 meeting with FTC staff and the initiation of custodian identification and data collection), we estimate that the complete document review and interrogatory response process will require approximately 10 to 14 weeks to complete. This timeline is based on the following assumptions:

• Custodian identification and preservation notices: completed by July 26, 2024;

• E-discovery vendor engagement and data collection: completed by August 9, 2024;

• Data processing and TAR model training: completed by August 16, 2024;

• First-pass TAR and manual relevance review: approximately 6–8 weeks (August 16 – mid-October 2024);

• Privilege review and privilege log preparation: concurrent with relevance review, completed by late October 2024;

• Interrogatory data compilation and narrative drafting: concurrent with document review, completed by late October 2024;

• Final quality control, production preparation, and certification: 1–2 weeks following completion of review.

Based on this timeline, we target certification of substantial compliance in mid-October to early November 2024. Following certification, the statutory waiting period under the HSR Act will restart, and the parties must observe an additional 30 calendar days before the transaction may close. Accordingly, the earliest realistic closing date — assuming no further delays, no challenges to the certification of substantial compliance, and no additional requests from FTC staff — would be in mid-November to early December 2024.

We emphasize that this timeline is subject to several variables, including the outcome of scope negotiations with FTC staff (which could shorten the timeline), the actual volume of documents identified during collection (which could lengthen it), the pace of FTC staff review of our production (which may generate additional questions or requests), and any decisions by FTC staff to seek additional information or schedule investigational hearings (depositions). We will provide updated timeline estimates as the compliance process progresses.

E. Scope Negotiation with FTC Staff

A critical element of the compliance strategy — and one that can significantly impact both the cost and duration of the process — is negotiation of limitations on the scope of the Second Request with the FTC Mergers IV Division staff. Scope negotiations are standard practice in Second Request proceedings and are conducted with the understanding that a reasonable narrowing of the request's specifications, custodian lists, and date ranges can reduce the burden on the responding party while still providing the FTC with the information necessary to complete its competitive analysis.

We have a meeting scheduled with FTC Mergers IV Division staff on July 22, 2024. This meeting will be the first substantive engagement with staff since the issuance of the Second Request, and it is a critical opportunity to set the tone for the compliance process and to begin shaping the staff's analytical framework.

Our objectives for the July 22 meeting are as follows:

(i) Present arguments for a broader market definition. We will present our preliminary market definition arguments, emphasizing the substitutability of SMAs and commingled funds, the total-portfolio allocation approach used by institutional investors, and the breadth and depth of the competitive landscape. Our goal is to plant the seeds for a broader market definition that, if accepted, would render the combined shares competitively insignificant and potentially lead to early resolution of the investigation.

(ii) Propose a reduced custodian list. We will propose limiting the custodian list to 8 to 10 custodians (rather than the 12 to 15 that would be required under a literal reading of the Second Request's specifications), focusing on the individuals wi

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT
MEMORANDUM
From: Howard Bellamy, Partner, and Elliot Nguyen, Associate — Antitrust & Competition Group, Calderwood & Harkness LLP, 425 Lexington Avenue, New York, NY 10017
To: Gavin Trask, Managing Partner & Chairman, and Diane Ochoa, Partner, Head of Financial Services Investments — Harrowgate Capital Management LLC, 1200 North Market Street, Suite 1400, Wilmington, DE 19801
Date: July 19, 2024
Re: FTC Second Request — Initial Analysis and Recommended Compliance Strategy; Proposed Acquisition of Ridgemark Capital Advisors, LLC by Harrowgate Private Equity Fund IV, L.P.
Matter No.: 1003-00001
FTC Transaction No.: 2418-7603
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I. Executive Summary
The purpose of this memorandum is to analyze the Second Request issued by the Federal Trade Commission ("FTC") on July 16, 2024, and to recommend a comprehensive compliance strategy for Harrowgate Capital Management LLC ("HCM"), in its capacity as the Ultimate Parent Entity of Harrowgate Private Equity Fund IV, L.P. ("HPE Fund IV"), in connection with HPE Fund IV's proposed acquisition of 100% of the outstanding membership interests of Ridgemark Capital Advisors, LLC ("Ridgemark" or "RCA").
As you are aware, HSR Notification and Report Forms were filed on June 18, 2024, by both the Acquiring Person and the Acquired Person pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (15 U.S.C. § 18a) (the "HSR Act"), and the implementing rules promulgated thereunder at 16 C.F.R. Parts 801–803. The filings were made in connection with HPE Fund IV's proposed acquisition of 100% of the outstanding membership interests of Ridgemark, as contemplated by the Membership Interest Purchase Agreement dated June 4, 2024 (the "MIPA"). The FTC acknowledged receipt of both filings on June 21, 2024, and clearance for antitrust review of the proposed transaction was assigned to the FTC rather than the United States Department of Justice Antitrust Division ("DOJ"), consistent with the FTC's historical jurisdiction over transactions in the financial services and asset management sectors.
The initial 30-day statutory waiting period under the HSR Act was set to expire on July 18, 2024. However, on July 8, 2024, the FTC's Bureau of Competition, Mergers IV Division issued a voluntary access letter to Calderwood & Harkness LLP ("C&H") requesting additional documents responsive to Items 4(c) and 4(d) of the HSR Notification and Report Form, specifically requesting supplemental production of certain board presentations and internal strategy documents relating to the competitive landscape in alternative credit investment management. We produced 23 supplemental documents on July 10, 2024, in response to that voluntary access letter.
On July 16, 2024 — two days before the expiration of the initial waiting period — the FTC issued a formal Second Request (sometimes referred to as a "Request for Additional Information and Documentary Material") to both the Acquiring Person and the Acquired Person, pursuant to 15 U.S.C. § 18a(e)(1)(A) and 16 C.F.R. § 803.20. The issuance of the Second Request has the effect of tolling the statutory waiting period indefinitely until 30 days after the date on which both the Acquiring Person and the Acquired Person have certified substantial compliance with the Second Request.
The proposed transaction has a total enterprise value of approximately $370 million, with an equity purchase price of approximately $328 million (calculated as $370 million in total enterprise value minus approximately $42 million in net funded debt as of the anticipated closing date). The transaction is governed by the MIPA, which was executed on June 4, 2024, by and among HPE Fund IV, as Buyer, Ridgemark Capital Advisors, LLC, Jonathan Kessler, Priya Narayanan, the other individual members identified therein, and Thornfield Growth Partners, LLC, as Sellers.
This memorandum is organized to accomplish the following objectives: (a) summarize the Second Request's document specifications and interrogatories, including the scope and burden of the compliance obligation; (b) identify the FTC's primary competitive concerns as articulated in the Second Request and the accompanying cover letter from FTC staff; (c) recommend a compliance strategy, including custodian identification, document review methodology, interrogatory response preparation, timeline, and scope negotiation; and (d) discuss the implications of the Second Request for the MIPA's regulatory closing condition and outside date, including the reverse termination fee.
We note that early termination of the HSR Act waiting period was not requested by the parties in connection with the June 18, 2024 filing. This decision was consistent with our prior recommendation in the antitrust risk assessment memorandum dated June 10, 2024, in which we advised that an early termination request was inadvisable given the anticipated potential for heightened FTC scrutiny arising from the competitive overlaps between Ridgemark and Dunmore Asset Management LLC ("Dunmore"), an existing portfolio company of HPE Fund IV. A request for early termination, which would have been published in the Federal Register, would have prematurely signaled the transaction to competitors and market participants without any meaningful prospect of accelerating clearance.
Finally, we address in this memorandum our recommended strategy for the upcoming meeting with FTC Mergers IV Division staff, which is currently scheduled for July 22, 2024. That meeting will be a critical opportunity to engage constructively with staff, present our preliminary market definition arguments, and negotiate meaningful limitations on the scope of the Second Request. A separate, more detailed meeting preparation memorandum will be circulated prior to the July 22 session.
II. Background
A. Transaction Overview
Harrowgate Private Equity Fund IV, L.P. HPE Fund IV is a Delaware limited partnership with a total committed capital base of approximately $6.2 billion, having held its final close in December 2023. HPE Fund IV is managed by its general partner, Harrowgate Capital Management LLC, a Delaware limited liability company that serves as the Ultimate Parent Entity for purposes of HSR Act compliance. HCM's principal offices are located at 1200 North Market Street, Suite 1400, Wilmington, DE 19801. HPE Fund IV's investment strategy is focused on middle-market acquisitions in the financial services and asset management sectors, with a particular emphasis on platform acquisitions and subsequent add-on investments designed to build scale in specialized investment management verticals. HPE Fund IV's investment thesis centers on acquiring firms with differentiated investment capabilities, strong client relationships, and demonstrable organic growth potential, with the goal of building diversified multi-strategy investment management platforms.
The key principals at HCM responsible for the proposed Ridgemark acquisition are Gavin Trask, Managing Partner and Chairman, who serves as the senior decision-maker for HPE Fund IV's investment committee; Diane Ochoa, Partner and Head of Financial Services Investments, who leads the deal team and is the primary commercial sponsor of the transaction; and Marcus Hale, Vice President, Deal Execution, who has served as the day-to-day deal lead throughout the negotiation, due diligence, and regulatory filing processes.
Ridgemark Capital Advisors, LLC. Ridgemark is a Delaware limited liability company and an SEC-registered investment adviser (CRD No. 298174). Ridgemark is headquartered at 600 Boylston Street, Suite 3200, Boston, MA 02116, and employs approximately 112 individuals, including approximately 38 investment professionals. Ridgemark's assets under management ("AUM") totaled approximately $4.7 billion as of March 31, 2024, the most recently reported date. For the trailing twelve months ended March 31, 2024, Ridgemark generated total revenue of approximately $58.3 million, consisting of management fees of approximately $51.1 million and performance/incentive fees of approximately $7.2 million. Ridgemark's trailing twelve-month EBITDA for the same period was approximately $16.8 million, representing an EBITDA margin of approximately 28.8%.
Ridgemark's core business lines include: (i) separately managed accounts ("SMAs") for institutional investors, including pension funds, endowments, foundations, and insurance companies; (ii) alternative credit strategies, including private credit, structured credit (CLOs, CMBS, and ABS), and distressed/event-driven investing; and (iii) sub-advisory services for mutual fund complexes, pursuant to which Ridgemark manages alternative credit portfolios as sub-adviser to registered mutual fund sponsors.
Prior to the proposed transaction, Ridgemark's equity ownership is held as follows: Jonathan Kessler (Founder & CEO), approximately 38%; Priya Narayanan (COO), approximately 12%; other employee partners, approximately 20% in the aggregate; and Thornfield Growth Partners, LLC ("Thornfield"), a growth equity fund, approximately 30%. Thornfield acquired its stake in Ridgemark in 2019 and has been seeking an exit for approximately the past eighteen months.
Under the post-closing structure contemplated by the MIPA, Kessler and Narayanan will each retain approximately 10% rollover equity in the surviving entity, aligning their interests with HPE Fund IV and facilitating management continuity during the post-acquisition transition period. Thornfield will receive a full cash exit at closing, with expected proceeds of approximately $98.4 million (calculated as 30% of the $328 million equity purchase price, subject to customary closing adjustments for working capital, indebtedness, transaction expenses, and any other adjustments specified in the MIPA). The employee partners holding the remaining 20% will receive a combination of cash consideration and rollover equity, with the precise allocation to be determined in accordance with the individual equity participation agreements referenced in the MIPA.
Transaction Advisors. The financial advisor to Harrowgate in connection with the proposed transaction is Greycastle Partners LLC, with Mitchell Avery, Managing Director, serving as the lead banker. The financial advisor to Ridgemark is Cairnstone Advisory Group LLC, with Laura Feng, Managing Director, serving as the lead adviser. Debt financing for the proposed transaction will be provided under a $280 million senior secured credit facility from Meridian National Bank, N.A., pursuant to a commitment letter dated June 3, 2024 (Gerald Statham, Senior Vice President, Sponsor Finance, serves as the lead financing contact). Target's counsel in the transaction is Blackwell, Oakes & Hardin LLP, with Catherine Oakes serving as lead M&A counsel and Rajesh Subramaniam serving as antitrust counsel. Thornfield's counsel is Lyle & Pennington LLP, with Thomas Pennington III serving as lead partner for the selling sponsor.
B. The Competitive Overlap: Dunmore Asset Management LLC
The competitive concern animating the FTC's scrutiny of the proposed transaction arises from the horizontal overlap between Ridgemark and Dunmore Asset Management LLC ("Dunmore"), an existing portfolio company within HPE Fund IV's investment portfolio. A thorough understanding of Dunmore's business and its degree of competitive overlap with Ridgemark is essential to framing our compliance and advocacy strategy.
Dunmore Asset Management LLC is a Delaware limited liability company and SEC-registered investment adviser headquartered at 227 West Monroe Street, Suite 4100, Chicago, IL 60606. HPE Fund IV acquired Dunmore in the second quarter of 2023 as a platform investment in the alternative credit investment management space. Franklin Broussard serves as Dunmore's Chief Executive Officer. Dunmore's AUM totals approximately $3.9 billion as of the most recent reporting date. Critically, Dunmore manages approximately $2.1 billion in alternative credit separately managed accounts for U.S. institutional clients, a business line that directly overlaps with Ridgemark's alternative credit SMA offering. Ridgemark, for its part, manages approximately $1.4 billion in alternative credit SMAs for U.S. institutional clients.
Both Dunmore and Ridgemark are classified under NAICS code 523920 (Portfolio Management) for their core business activities. Ridgemark is additionally coded under NAICS code 523910 (Miscellaneous Intermediation) to reflect certain of its sub-advisory and intermediary activities.
The horizontal overlap between Dunmore and Ridgemark in alternative credit separately managed accounts for institutional investors, and to a lesser extent in sub-advisory services for alternative credit mutual funds, is the core driver of the FTC's decision to issue the Second Request. The combined alternative credit SMA AUM of the two firms — approximately $3.5 billion — represents a meaningful share of the narrowly defined relevant market that the FTC staff appears to be evaluating, as discussed in greater detail in Section III.D and Section IV below.
C. HSR Filing and Procedural History
The HSR Notification and Report Forms were filed on June 18, 2024, by both the Acquiring Person (HCM, as Ultimate Parent Entity of HPE Fund IV) and the Acquired Person (Ridgemark), pursuant to the requirements of the HSR Act, 15 U.S.C. § 18a, and the implementing rules at 16 C.F.R. Parts 801–803. The filing was required because the proposed transaction satisfied both the size-of-transaction test and the size-of-persons test under the 2024 HSR Act jurisdictional thresholds, as adjusted by the FTC's annual revisions effective February 27, 2024.
With respect to the size-of-transaction test, the total enterprise value of the proposed transaction ($370 million) exceeds the 2024 jurisdictional threshold of $119.5 million, thereby satisfying the first prong of the HSR Act's notification requirements. With respect to the size-of-persons test, HCM's total assets across all managed funds and entities exceed $23.9 billion (well in excess of the $239 million threshold for the larger person), and Ridgemark's total assets of approximately $87 million (excluding client AUM, which is not attributable to Ridgemark for HSR purposes) exceed the $23.9 million threshold for the smaller person. Both prongs of the size-of-persons test were therefore satisfied. The applicable HSR Act filing fee was $160,000, calculated based on the transaction value falling within the $173.3 million to $536.4 million band under the 2024 filing fee schedule as revised by the Merger Filing Fee Modernization Act of 2022.
The FTC acknowledged receipt of both HSR filings on June 21, 2024, and clearance for antitrust review was assigned to the FTC (rather than the DOJ Antitrust Division), consistent with the interagency clearance process and the FTC's traditional jurisdiction over financial services and asset management transactions. As noted above, early termination of the initial waiting period was not requested by either party, consistent with our June 10, 2024 recommendation.
The relevant procedural timeline is as follows:
•  June 4, 2024: Execution of the Membership Interest Purchase Agreement.
•  June 18, 2024: Filing of HSR Notification and Report Forms by both the Acquiring Person and the Acquired Person.
•  June 21, 2024: FTC acknowledgment of receipt; clearance assigned to the FTC.
•  July 8, 2024: FTC Bureau of Competition, Mergers IV Division issued a voluntary access letter requesting additional documents responsive to Items 4(c) and 4(d) of the HSR Notification and Report Form, focusing on board presentations and internal strategy documents relating to the competitive landscape in alternative credit investment management.
•  July 10, 2024: Calderwood & Harkness produced 23 supplemental Item 4 documents responsive to the voluntary access letter.
•  July 16, 2024: FTC issued the Second Request to both the Acquiring Person and the Acquired Person, tolling the initial waiting period.
•  July 18, 2024: The initial 30-day statutory waiting period expired, although the expiration was rendered moot by the issuance of the Second Request two days prior, which tolled the waiting period pending substantial compliance.
III. Summary of the Second Request
A. Overview and Statutory Framework
A Second Request is a formal demand for additional information and documentary material issued by the FTC (or the DOJ Antitrust Division, as applicable) pursuant to Section 7A(e) of the Clayton Act, 15 U.S.C. § 18a(e), and 16 C.F.R. § 803.20. The issuance of a Second Request is the principal mechanism by which the antitrust enforcement agencies extend their review of a proposed transaction beyond the initial 30-day statutory waiting period. The legal effect of a Second Request is to toll the statutory waiting period until 30 days after both the Acquiring Person and the Acquired Person have substantially complied with the request. In the case of a cash tender offer or certain other acquisition types specified in the statute, the post-compliance waiting period is 10 days rather than 30 days; however, because the proposed transaction is structured as a direct purchase of membership interests pursuant to the MIPA and does not involve a tender offer, the standard 30-day post-compliance waiting period applies.
The Second Request in this matter is addressed to Harrowgate Capital Management LLC, as Ultimate Parent Entity of the Acquiring Person (Harrowgate Private Equity Fund IV, L.P.), and was issued separately to Ridgemark Capital Advisors, LLC, as the Acquired Person. The request was issued by the FTC's Bureau of Competition, Mergers IV Division, under the signature of the Division's Assistant Director. Both the Acquiring Person and the Acquired Person are independently obligated to comply with the Second Request, and the statutory waiting period will not recommence until both parties have certified substantial compliance.
It is important to note that the standard for compliance with a Second Request is "substantial compliance," not perfect or complete compliance. The FTC's Premerger Notification Office has historically interpreted substantial compliance to mean that the responding party has made a good-faith effort to produce all responsive documents and data and has completed the production to the extent reasonably practicable. Nevertheless, the FTC retains discretion to challenge a certification of substantial compliance if it believes the production is materially deficient, and any such dispute could further delay the transaction. Accordingly, our compliance strategy must be thorough and well-documented.
B. Document Specifications
The Second Request contains detailed document specifications that define the categories of documents and communications that must be collected, reviewed for relevance and privilege, and produced to the FTC. We summarize the key elements of the document specifications below.
Custodians. The Second Request identifies categories of persons whose files must be searched and whose documents must be collected for review and potential production. Specifically, the request requires production of documents from the files of all officers, directors, and employees of the Acquiring Person (including HCM and its affiliates, expressly including Dunmore Asset Management LLC) with responsibilities related to any of the following areas:
(i) the proposed acquisition of Ridgemark, including any aspect of the negotiation, evaluation, due diligence, or approval process;
(ii) alternative credit investment strategies, including private credit, structured credit, and distressed/event-driven strategies;
(iii) separately managed account business development, client relationship management, and marketing activities directed at institutional investors;
(iv) sub-advisory services for mutual fund complexes, including alternative credit sub-advisory mandates;
(v) competitive strategy, pricing, fee analysis, and market analysis relating to alternative credit investment management services; and
(vi) integration planning for the proposed combination of Ridgemark and Dunmore or any other post-closing operational changes contemplated in connection with the proposed transaction.
Date Range. The Second Request specifies a document collection date range of January 1, 2021 through the date of full compliance with the Second Request. This represents a collection window of approximately three and a half years at the outset, which will extend further depending on the length of the compliance process. The breadth of the date range is consistent with recent FTC practice in merger investigations, which has trended toward longer look-back periods in order to capture multi-year competitive trends, strategic planning cycles, and historical bidding and client data.
Document Types. The Second Request requires production of all documents and communications within the scope of the defined specifications, without limitation as to format or medium. This includes, but is not limited to, emails, instant messages (including messages exchanged via platforms such as Northgate Data Systems, Meridian Solutions, Westmark Services Inc. IB, and similar messaging applications), presentations (including Northgate Services Inc. and similar formats), reports, analyses, spreadsheets, meeting minutes, board materials, investment committee memoranda, client correspondence, and any other documents or communications, whether in electronic or hard-copy form, that are responsive to the defined specifications.
Key Specification Categories. The Second Request organizes its document demands into several thematic categories, which we summarize as follows:
(i) Competition in Alternative Credit SMAs. Documents and communications relating to competition, competitive conditions, competitive positioning, market shares, or competitive dynamics in the provision of separately managed account services focused on alternative credit strategies (including private credit, structured credit, CLOs, CMBS, ABS, distressed debt, and event-driven strategies) for U.S. institutional investors.
(ii) Sub-Advisory Services. Documents and communications relating to competition, competitive conditions, or competitive dynamics in the provision of sub-advisory services for alternative credit mutual funds, including any analysis of the market for sub-advisory mandates, competitive pitch situations, or strategic assessments of sub-advisory opportunities.
(iii) Transaction-Related Documents. Documents and communications relating to the proposed transaction, including the strategic rationale, anticipated synergies, integration plans, competitive implications, due diligence materials, board and investment committee presentations, and any analyses prepared by or for the parties or their financial advisors relating to the expected competitive effects of the transaction.
(iv) Market Definition and Market Share. Documents and communications relating to market definition, market share estimation, market sizing, or total addressable market analysis for alternative credit investment management services, whether prepared internally or by third-party consultants, industry groups, or financial advisors.
(v) Customers, Pricing, and Fee Arrangements. Documents and communications relating to the identification of customers for alternative credit SMA and sub-advisory services, including fee schedules, fee negotiation correspondence, pricing policies, and any analysis of customer switching costs or customer alternatives.
(vi) Dunmore-Specific Documents. Documents and communications relating to Dunmore Asset Management LLC's alternative credit business, competitive positioning, client relationships, investment strategies, and any assessments of competitive overlap or complementarity between Dunmore and Ridgemark.
Privilege Log Requirement. The Second Request requires that a detailed privilege log be prepared and submitted for all documents withheld from production on the basis of attorney-client privilege, work product protection, or any other applicable privilege or protection. The privilege log must identify each withheld document by date, author, recipient(s), general subject matter, and the specific basis for the privilege claim. This requirement is standard in Second Request practice but is worth highlighting because the volume of privileged communications in a transaction of this nature — particularly board-level communications, investment committee discussions, and counsel-advised strategic analyses — can be significant, and the preparation of a compliant privilege log is itself a substantial undertaking.
C. Interrogatory Specifications
In addition to the document specifications described above, the Second Request includes a set of approximately 20 to 25 interrogatories requiring detailed narrative responses, data compilations, and structured data submissions. These interrogatories are designed to elicit factual information that may not be fully captured in the document production, and to require the responding party to organize and present data in formats that facilitate the FTC staff's competitive analysis.
The key interrogatory topics include the following:
Client and Account Data. Identification of all alternative credit SMA accounts managed by Ridgemark and Dunmore, respectively, including for each account the client name, current AUM, investment strategy (e.g., private credit, structured credit, distressed), management fee rate (expressed as a percentage of AUM), performance/incentive fee rate (if applicable), and inception date. This interrogatory is designed to enable FTC staff to construct a comprehensive picture of the parties' institutional client bases and to identify any client overlap.
Revenue and AUM Disaggregation. Revenue and AUM data for Ridgemark and Dunmore, broken out by product type (separately managed accounts, sub-advisory mandates, commingled funds, and any other product categories), for each of the last three fiscal years (2021, 2022, and 2023) and year-to-date 2024. This data will enable the FTC to assess trends in the parties' relative market positions and to evaluate the magnitude of the competitive overlap across different product lines.
Competitive Pitch and "Beauty Contest" Data. Identification of all competitive pitch situations (sometimes referred to as "beauty contests" or "bake-offs") for alternative credit SMA mandates in which either Ridgemark or Dunmore participated during the last three years. For each such pitch, the interrogatory requires identification of the prospective client, the other firms that competed for the mandate, the outcome (won/lost/pending), the proposed fee structure, the proposed investment strategy, and any available information regarding the fees or strategies proposed by competing firms.
Client Attrition Data. Identification of all clients that have terminated, reduced allocations to, or declined to renew alternative credit SMA mandates with Ridgemark or Dunmore during the last three years, together with an explanation of the reasons for each termination, reduction, or non-renewal, including whether the client moved assets to a competitor, reallocated to a different asset class, or made a change for other reasons.
Market Participants and Competitive Dynamics. A narrative description of the market participants, competitive landscape, barriers to entry, and competitive dynamics in the alternative credit SMA and sub-advisory segments, including identification of the firms that Ridgemark and Dunmore each consider to be their primary competitors.
Integration Planning. A detailed description of the planned post-closing integration of Ridgemark and Dunmore, including whether the parties intend to combine investment teams, consolidate client relationships, harmonize fee structures, integrate technology platforms, or make any other operational changes that would affect the competitive positioning of the combined entity.
Organizational and Personnel Data. Organizational charts for the alternative credit investment groups at both Ridgemark and Dunmore, together with employee data (name, title, function, compensation, and years of experience) for all investment professionals engaged in alternative credit strategies at either firm.
D. FTC's Identified Competitive Concerns
The Second Request and the accompanying cover letter from FTC Mergers IV Division staff articulate two primary areas of competitive concern that are driving the agency's investigation:
First, the FTC is concerned about the horizontal overlap in separately managed accounts focused on alternative credit strategies — including private credit, structured credit, and distressed debt — for U.S. institutional investors. The institutional client base at issue includes pension funds (both public and corporate), endowments, foundations, insurance companies, and other large asset owners that allocate capital to alternative credit strategies through SMA vehicles. The FTC staff's concern is that the combination of Dunmore's approximately $2.1 billion and Ridgemark's approximately $1.4 billion in alternative credit SMAs — a combined total of approximately $3.5 billion — would result in a meaningful increase in concentration in this segment, potentially reducing competition for institutional mandates and enabling the combined entity to exercise greater pricing power or reduce the quality of service provided to institutional clients.
Second, the FTC is concerned about the horizontal overlap in sub-advisory services for alternative credit mutual funds. Both Dunmore and Ridgemark provide sub-advisory services to registered mutual fund complexes, managing alternative credit portfolios on behalf of fund sponsors. The FTC staff appears to view the sub-advisory market as a related but potentially distinct segment in which the combination could reduce the number of available sub-advisory providers for fund sponsors seeking alternative credit capabilities.
Significantly, the FTC staff have estimated a combined market share of approximately 14% to 18% in the alternative credit SMA market for U.S. institutional clients, based on what appears to be a narrow relevant market definition. The narrow market definition employed by FTC staff appears to focus on three key parameters: (a) alternative credit strategies specifically, to the exclusion of traditional fixed income, equities, real estate, and other asset classes; (b) the SMA delivery vehicle specifically, to the exclusion of commingled funds, ETFs, interval funds, and other pooled investment vehicles; and (c) U.S. institutional clients specifically, to the exclusion of retail investors, high-net-worth individuals, and non-U.S. institutional investors.
Working from the FTC staff's estimated combined share of 14% to 18% and the combined Dunmore/Ridgemark alternative credit SMA AUM of approximately $3.5 billion, the implied total size of the narrowly defined market is approximately $19 billion to $25 billion. This range is broadly consistent with publicly available industry data on alternative credit SMA assets managed for U.S. institutional investors, although the precise market boundaries will be a central point of contention in our advocacy before FTC staff.
We note that the estimated combined share of 14% to 18% falls below the 25% to 30% threshold at which courts and enforcement agencies have historically found a presumption of competitive harm in horizontal merger cases, as articulated by the Supreme Court in United States v. Philadelphia National Bank, 374 U.S. 321 (1963), and as refined in subsequent case law and the FTC/DOJ 2023 Merger Guidelines. However, the FTC staff appears to be concerned about concentration dynamics specific to this specialized niche market, including the potential for coordinated effects among the remaining competitors and the risk that the transaction would eliminate particularly close competitors in a segment characterized by differentiated investment strategies and client relationships. The 2023 Merger Guidelines expressly recognize that competitive concerns may arise at concentration levels below the structural presumption threshold, particularly in markets with differentiated products, high barriers to switching, and a limited number of credible competitors.
IV. Assessment of Competitive Concerns
Having summarized the Second Request and the FTC staff's articulated concerns, we turn to an assessment of the substantive competitive merits. Our analysis supports the conclusion that the FTC's concerns, while not frivolous, are based on a narrow market definition that is vulnerable to challenge and on a combined market share that, even under the narrow definition, does not approach the levels at which enforcement action would be likely to succeed.
A. Arguments in Favor of a Broader Market Definition
The narrow market definition employed by FTC staff — alternative credit SMAs for U.S. institutional clients — is potentially overstated and does not reflect the competitive realities faced by institutional investors allocating capital to alternative credit strategies. Strong arguments exist for a broader relevant product market that would substantially reduce the combined Dunmore/Ridgemark market share.
Substitutability of Investment Vehicles. Alternative credit SMAs compete directly with commingled alternative credit funds, interval funds, and business development companies ("BDCs") for the same institutional capital allocations. Institutional investors routinely evaluate alternative credit investment opportunities across vehicle types, selecting the vehicle that best suits their liquidity needs, regulatory requirements, minimum investment thresholds, and governance preferences. The economic exposure and investment returns provided by a separately managed account are substantively identical to those provided by a commingled fund investing in the same strategies — the choice of vehicle is driven by operational and structural considerations, not by differences in the competitive dynamics of the underlying investment management service. Limiting the relevant market to SMAs alone artificially excludes close substitutes and overstates the parties' competitive significance.
Total-Portfolio Allocation Decisions. Many institutional clients — particularly large pension funds, endowments, and foundations — allocate capital to alternative credit on a total-portfolio basis, evaluating the alternative credit "sleeve" of their portfolio as a single allocation decision rather than making separate, vehicle-specific decisions. In this decision-making framework, an SMA offering competes directly with a commingled fund offering from the same or different manager, and the choice between vehicles is a second-order consideration. Substitution between SMAs and commingled funds is routine, and institutional consultants regularly present clients with a menu of options spanning both vehicle types.
Sub-Advisory Mandates as a Distinct Segment. To the extent the FTC staff collapses sub-advisory mandates for mutual fund complexes into the same market as direct SMA relationships with institutional investors, the resulting market definition overstates the combined share. Sub-advisory relationships are structurally distinct from direct SMA relationships: the client in a sub-advisory relationship is the mutual fund sponsor (which selects and oversees the sub-adviser), whereas the client in a direct SMA relationship is the institutional investor itself. The competitive dynamics, fee structures, contracting processes, and decision-makers differ materially between the two segments. If the sub-advisory segment is analyzed separately, the combined Dunmore/Ridgemark share in direct alternative credit SMAs alone may be somewhat lower than the 14% to 18% range estimated by the FTC staff.
Broader Market Share. Under a broader market definition encompassing all alternative credit products for institutional investors — including commingled funds, interval funds, BDCs, and other vehicles, in addition to SMAs — the combined Dunmore/Ridgemark share would fall well below 14%. Industry data from sources such as Tidewater Health IT, Bramwell Health IT, Ostrander Management Consulting, and the Investment Company Institute indicate that the total institutional alternative credit market (across all vehicles) exceeds $100 billion in AUM, which would place the combined Dunmore/Ridgemark share at approximately 3% to 4% — a level that would not raise competitive concerns under any analytical framework.
B. Distinct Competitive Characteristics of Dunmore vs. Ridgemark
Beyond market definition, the factual record should support the argument that Dunmore and Ridgemark are not particularly close competitors within the alternative credit space, reducing the likelihood that the transaction would meaningfully diminish competition.
Strategy Differentiation. Dunmore's alternative credit business is focused primarily on direct lending and middle-market private credit — that is, Dunmore originates and manages portfolios of privately negotiated loans to middle-market companies. Ridgemark's alternative credit business, by contrast, is weighted toward structured credit (including CLOs, CMBS, and ABS) and distressed/event-driven strategies. These are fundamentally different investment approaches, requiring different analytical capabilities, sourcing networks, and risk management frameworks. An institutional investor seeking exposure to direct lending is not typically considering Ridgemark as a close alternative, and vice versa.
Minimal Client Overlap. Preliminary analysis of the client rosters of both firms suggests that fewer than five institutional clients maintain active SMA relationships with both Dunmore and Ridgemark in alternative credit strategies. This limited overlap is consistent with the strategy differentiation described above — clients selecting a direct lending manager are making a different allocation decision than clients selecting a structured credit or distressed manager.
Geographic Concentration. Dunmore's institutional client base is concentrated in the Midwest and West Coast regions, reflecting Dunmore's Chicago headquarters and its historical business development focus. Ridgemark's institutional client base is concentrated in New England and the Mid-Atlantic region, reflecting its Boston headquarters and its longstanding relationships with pension funds, endowments, and insurance companies in those regions. While geographic concentration is not a traditional antitrust market-definition factor in investment management (where services are delivered nationally), the geographic pattern reinforces the conclusion that the two firms have developed largely independent client bases.
Different Portfolio Construction Approaches. Dunmore's direct lending portfolios are characterized by relatively concentrated positions in privately originated loans, with longer lock-up periods and limited secondary market liquidity. Ridgemark's structured credit and distressed portfolios are characterized by more diversified positions in publicly traded or semi-liquid instruments, with greater portfolio turnover and different risk/return profiles. The differing portfolio construction approaches and risk profiles further reduce the likelihood that the two firms are viewed by institutional clients as direct, head-to-head competitors.
C. Competitive Landscape and Ease of Entry
The alternative credit SMA market is populated by a large and growing number of competitors, ranging from large diversified asset managers with dedicated alternative credit platforms (such as Dunmore Asset Advisors, Harborview Investment Management, Ridgeline Investors, Pinnacle Asset Advisors, and Northgate Asset Advisors) to specialist credit managers (such as Fenmore Asset Management, Aldermere Capital Management, Westmark Investment Management, and Cornavel Partners) to bank-affiliated investment management platforms (such as Ridgeline Asset Management, Greaves Asset Management, and Harborline Asset Advisors). The breadth and depth of the competitive landscape undercuts any suggestion that the combination of Dunmore and Ridgemark would meaningfully reduce the options available to institutional investors.
Barriers to entry in the alternative credit SMA segment are moderate. Entry requires SEC registration as an investment adviser, development of a credible investment track record, establishment of compliance and risk management infrastructure, and the ability to attract and retain experienced investment professionals. However, these barriers are not insurmountable, and the market has seen significant new entry in recent years as the alternative credit sector has attracted substantial capital inflows. According to Tidewater Health IT data, the number of fund managers actively managing alternative credit strategies for institutional investors has grown by approximately 35% since 2020, driven by the secular shift of institutional capital from traditional fixed income to higher-yielding alternative credit strategies.
Recent industry trends show significant and accelerating capital inflows into private credit and structured credit, attracting new competitors and expanding the total market size. The Private Credit sector has been widely described in industry literature as one of the fastest-growing segments of institutional asset management, and the expansion of the addressable market reduces the competitive significance of any individual transaction.
D. Preliminary Conclusion on Substantive Risk
Based on the foregoing analysis, we assess the ultimate risk of an FTC enforcement action — whether in the form of a complaint seeking a preliminary or permanent injunction under Section 13(b) of the FTC Act, or a consent order requiring divestiture or other structural relief — as moderate, but manageable through the Second Request process.
The narrow market definition on which the FTC staff's preliminary analysis is based is vulnerable to challenge on multiple grounds, as outlined above. Under a broader and, we believe, more economically sound market definition, the combined Dunmore/Ridgemark share would not raise serious competitive concerns. Moreover, the factual differentiation between Dunmore's direct lending focus and Ridgemark's structured credit and distressed focus undermines the FTC's theory that the two firms are close competitors whose combination would meaningfully diminish competition.
However, we do not dismiss the FTC's concerns. The agency's decision to issue a Second Request — a resource-intensive step that the FTC does not undertake lightly — indicates that the staff has identified genuine questions about the competitive effects of the proposed transaction that it believes warrant further investigation. The issuance of a Second Request occurs in only approximately 2% to 4% of all HSR filings in a given year, and the decision to issue one reflects a considered judgment by staff attorneys and economists that the transaction merits deeper scrutiny.
We recommend engaging constructively with FTC staff to negotiate meaningful scope limitations on the Second Request and to present our market definition arguments at the earliest available opportunity — specifically, at the July 22, 2024 meeting. A well-prepared advocacy effort at this stage can shape the staff's analytical framework and potentially narrow the scope of the investigation, reducing both the cost and duration of the compliance process and improving the prospects for ultimate clearance.
V. Recommended Compliance Strategy
We outline below our recommended strategy for complying with the Second Request in a manner that is thorough, efficient, and strategically aligned with our advocacy objectives.
A. Custodian Identification and Prioritization
The first step in the compliance process is to identify the individuals whose files must be searched and whose documents must be collected for review. Based on our analysis of the Second Request's custodian specifications, we recommend the following custodian list:
Harrowgate Capital Management LLC Custodians:
•  Gavin Trask, Managing Partner & Chairman — as the senior decision-maker and investment committee chair, Mr. Trask's files will contain transaction-related materials, strategic discussions regarding the alternative credit platform thesis, and communications with Diane Ochoa, Marcus Hale, and external advisors regarding the Ridgemark acquisition.
•  Diane Ochoa, Partner, Head of Financial Services Investments — as the commercial sponsor and deal lead, Ms. Ochoa's files will contain extensive transaction-related materials, competitive analysis, due diligence findings, and communications with Ridgemark management.
•  Marcus Hale, Vice President, Deal Execution — as the day-to-day deal lead, Mr. Hale's files will contain detailed operational materials, financial models, integration planning documents, and communications with financial and legal advisors.
•  Any additional HCM personnel involved in the transaction or with responsibility for the alternative credit investment thesis, including any members of the investment committee who participated in the approval of the Ridgemark acquisition and any operating partners or value creation professionals who analyzed the alternative credit market.
Dunmore Asset Management LLC Custodians:
•  Franklin Broussard, CEO — Mr. Broussard's files will contain strategic planning materials, competitive analyses, and communications with HPE Fund IV regarding the alternative credit business, including any discussions of the Ridgemark acquisition or potential competitive implications.
•  Head of Alternative Credit Strategies — the individual leading Dunmore's alternative credit investment team, whose files will contain investment strategy documents, performance analyses, and communications regarding competitive positioning.
•  Head of Business Development/Client Relations — the individual responsible for Dunmore's institutional client relationships and new business development activities, whose files will contain competitive pitch materials, client correspondence, and market intelligence.
•  Portfolio Managers focused on Private Credit SMAs — individual portfolio managers whose files may contain client-specific communications, investment performance reports, and competitive intelligence relevant to the FTC's analysis.
Greycastle Partners LLC Custodians:
•  Mitchell Avery, Managing Director — as the lead banker for the transaction, Mr. Avery's files will contain transaction-related presentations, competitive landscape analyses, market share data, and communications with Harrowgate regarding the strategic rationale for the acquisition.
•  Any analyst or associate at Greycastle who prepared materials analyzing the competitive landscape, market shares, or strategic rationale in connection with the transaction — these individuals' files may contain the underlying data and work papers supporting the presentations and analyses delivered to Harrowgate.
Based on the foregoing, we estimate a total of 12 to 15 custodians across all three entities. We recommend prioritizing custodians with direct responsibility for alternative credit SMA strategies and transaction-related analysis for initial document collection and review, as these custodians' files are most likely to contain the "hot documents" that will drive the FTC staff's competitive analysis. Specifically, we recommend beginning collection from the files of Diane Ochoa, Marcus Hale, Franklin Broussard, and Mitchell Avery, and proceeding to the remaining custodians on a rolling basis.
B. Document Collection and Review Workflow
Date Range. Consistent with the Second Request's specification, the document collection date range will be January 1, 2021 through the date of full compliance with the Second Request. As noted above, this represents a collection window of more than three and a half years.
Estimated Document Universe. Based on our experience with comparable Second Request compliance efforts in the financial services sector, and taking into account the number of custodians and the length of the collection window, we estimate that the total document universe (prior to relevance review) will consist of approximately 350,000 to 500,000 documents across all custodians. This estimate includes emails, instant messages, documents stored on shared drives and document management systems, and any other electronic files responsive to the collection specifications. The actual volume may vary depending on the custodians' document retention practices, email volume, and use of messaging platforms.
E-discovery Vendor. We recommend engaging a qualified e-discovery vendor for data collection, processing, hosting, and technology-assisted review ("TAR") / predictive coding. We have worked successfully on prior Second Request matters with several leading vendors, including Lighthouse, Relativity, and Ashgrove Systems, and will recommend a specific vendor based on pricing, capacity, and prior experience with FTC Second Request productions. The selected vendor will be responsible for collecting data from custodians' email systems (including Strathmore Data Systems/Outlook and any other email platforms), instant messaging platforms (including Northgate Data Systems, Westmark Services Inc. IB, and any other messaging systems in use), shared network drives, and document management systems; processing the collected data to remove duplicates, system files, and non-responsive file types; and hosting the processed data on a review platform for use by the review team.
Review Protocol. We recommend a multi-phase review protocol designed to maximize efficiency while ensuring thoroughness and compliance:
First Pass — Technology-Assisted Review (TAR). We will use TAR / predictive coding to train a machine-learning model to identify documents likely to be responsive to the Second Request's specifications. This will involve an initial seed set review by experienced C&H attorneys to train the model, followed by iterative model refinement and validation. TAR has been widely accepted by courts and regulatory agencies, including the FTC, as an appropriate and defensible methodology for document review in Second Request proceedings. We expect TAR to significantly reduce the volume of documents requiring manual review, potentially by 50% to 70%.
Second Pass — Manual Relevance Review. Documents identified by the TAR model as likely responsive will be subject to manual review by trained reviewers (C&H associates and contract attorneys) to confirm responsiveness and code documents by issue, specification, and confidentiality designation. We will establish a detailed review protocol and coding manual prior to the commencement of review, and will conduct regular quality control checks throughout the process.
Third Pass — Privilege Review. All documents identified as responsive during the relevance review will be reviewed for attorney-client privilege, work product protection, and any other applicable privileges. Documents withheld from production on the basis of privilege will be logged on the privilege log in accordance with the Second Request's specifications. Privilege review will be conducted by C&H associates and partners to ensure consistency and accuracy of privilege determinations.
Fourth Pass — "Hot Document" Review. Documents identified during the review process as particularly sensitive or significant — including documents that discuss competitive dynamics, market shares, the transaction rationale, integration planning, or competitive concerns — will be escalated for review by C&H partners. We will prepare a "hot document" report summarizing the key documents and their potential significance for the FTC staff's competitive analysis. This report will inform our advocacy strategy and our preparation for any FTC staff interviews or depositions.
Coordination with Acquired Person's Counsel. We will coordinate closely with Blackwell, Oakes & Hardin LLP (Rajesh Subramaniam) on the Acquired Person's parallel compliance effort. Coordination is important for several reasons: (i) to ensure consistency in approach, including custodian identification, search methodology, and coding protocols; (ii) to avoid duplicative production of documents held by both parties; (iii) to coordinate privilege determinations on joint-privilege communications; and (iv) to present a unified and coherent factual narrative to the FTC staff. We anticipate regular working-level calls between the C&H and Blackwell, Oakes teams throughout the compliance process.
C. Data Compilation for Interrogatory Responses
Compliance with the Second Request's interrogatory specifications will require the compilation of structured data sets and the preparation of detailed narrative responses. This effort will involve significant coordination across Harrowgate, Dunmore, and Ridgemark.
Structured Data Sets. We will coordinate with the operational and finance teams at Harrowgate, Dunmore, and Ridgemark to compile the following data sets, among others:
•  Complete client lists for alternative credit SMA accounts at both Dunmore and Ridgemark, including client name, AUM, strategy type, fee rate, and inception date;
•  Revenue and AUM data disaggregated by product type (SMA, sub-advisory, commingled fund, other) for each of the fiscal years 2021, 2022, and 2023, and year-to-date 2024;
•  Competitive pitch/beauty contest logs for alternative credit SMA mandates over the past three years, including identification of the prospective client, competing firms, outcome, and fee proposals;
•  Client termination and attrition data, including identification of all clients that have terminated, reduced, or not renewed alternative credit SMA mandates during the past three years, with reasons for each departure;
•  Fee schedules and fee negotiation history for representative alternative credit SMA accounts;
•  Organizational charts and employee rosters for the alternative credit investment teams at both Dunmore and Ridgemark.
Financial Data Verification. We recommend engaging the parties' respective independent auditors — Pallister & Greaves Bramwell CPAs LLP (Harrowgate/Dunmore) and Ashfield, Stroval & Co. LLP (Ridgemark) — as needed to verify the accuracy and completeness of the financial data included in the interrogatory responses. While auditor involvement is not required by the Second Request, the use of verified financial data will enhance the credibility of our submissions and reduce the risk of FTC staff challenges to the accuracy of our data.
Narrative Responses. We will draft detailed narrative responses to the interrogatories addressing competitive dynamics, market participants, barriers to entry, and the competitive landscape in the alternative credit SMA and sub-advisory segments. These narratives will be an important advocacy tool, and we will draft them to present our market definition arguments and competitive analysis in the most favorable light, while remaining accurate and complete. All narrative responses will be reviewed and approved by the deal team prior to submission.
Integration Planning Interrogatory. The interrogatory regarding post-closing integration plans warrants particular care. Our response must be consistent with the MIPA's representations and warranties, the parties' pre-closing conduct obligations (including gun-jumping restrictions), and the commercial plans that the deal team has developed. We will coordinate closely with Diane Ochoa, Marcus Hale, and the broader deal team to ensure that the integration planning narrative presented to the FTC is both accurate and consistent with the parties' other communications regarding the transaction.
D. Estimated Timeline for Substantial Compliance
Assuming that compliance efforts commence in earnest in late July 2024 (following the July 22 meeting with FTC staff and the initiation of custodian identification and data collection), we estimate that the complete document review and interrogatory response process will require approximately 10 to 14 weeks to complete. This timeline is based on the following assumptions:
•  Custodian identification and preservation notices: completed by July 26, 2024;
•  E-discovery vendor engagement and data collection: completed by August 9, 2024;
•  Data processing and TAR model training: completed by August 16, 2024;
•  First-pass TAR and manual relevance review: approximately 6–8 weeks (August 16 – mid-October 2024);
•  Privilege review and privilege log preparation: concurrent with relevance review, completed by late October 2024;
•  Interrogatory data compilation and narrative drafting: concurrent with document review, completed by late October 2024;
•  Final quality control, production preparation, and certification: 1–2 weeks following completion of review.
Based on this timeline, we target certification of substantial compliance in mid-October to early November 2024. Following certification, the statutory waiting period under the HSR Act will restart, and the parties must observe an additional 30 calendar days before the transaction may close. Accordingly, the earliest realistic closing date — assuming no further delays, no challenges to the certification of substantial compliance, and no additional requests from FTC staff — would be in mid-November to early December 2024.
We emphasize that this timeline is subject to several variables, including the outcome of scope negotiations with FTC staff (which could shorten the timeline), the actual volume of documents identified during collection (which could lengthen it), the pace of FTC staff review of our production (which may generate additional questions or requests), and any decisions by FTC staff to seek additional information or schedule investigational hearings (depositions). We will provide updated timeline estimates as the compliance process progresses.
E. Scope Negotiation with FTC Staff
A critical element of the compliance strategy — and one that can significantly impact both the cost and duration of the process — is negotiation of limitations on the scope of the Second Request with the FTC Mergers IV Division staff. Scope negotiations are standard practice in Second Request proceedings and are conducted with the understanding that a reasonable narrowing of the request's specifications, custodian lists, and date ranges can reduce the burden on the responding party while still providing the FTC with the information necessary to complete its competitive analysis.
We have a meeting scheduled with FTC Mergers IV Division staff on July 22, 2024. This meeting will be the first substantive engagement with staff since the issuance of the Second Request, and it is a critical opportunity to set the tone for the compliance process and to begin shaping the staff's analytical framework.
Our objectives for the July 22 meeting are as follows:
(i) Present arguments for a broader market definition. We will present our preliminary market definition arguments, emphasizing the substitutability of SMAs and commingled funds, the total-portfolio allocation approach used by institutional investors, and the breadth and depth of the competitive landscape. Our goal is to plant the seeds for a broader market definition that, if accepted, would render the combined shares competitively insignificant and potentially lead to early resolution of the investigation.
(ii) Propose a reduced custodian list. We will propose limiting the custodian list to 8 to 10 custodians (rather than the 12 to 15 that would be required under a literal reading of the Second Request's specifications), focusing on the individuals wi

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