In May 2025, Dailane Investments Limited, representing minority shareholder Michael Maillis, filed suit against private equity firm H.I.G. Capital over its 2022 sale of portfolio company Maillis Group (“Maillis”). The transaction moved Maillis from an older fund (Bayside Capital Fund II) into a newer one (H.I.G. Middle Market LBO Fund III), also managed by H.I.G. The deal valued the business at €157.5 million.
Dailane claims the valuation was unfair. According to the complaint, H.I.G. manipulated the company’s pension obligations—overstating them by €9.5 million, making the business appear less valuable than it actually was. The suit also alleges that H.I.G. ignored a third-party bid that offered a higher price—choosing instead to sell the asset to itself through a continuation fund.
H.I.G. denies any wrongdoing, pointing to an independent fairness opinion and LPAC approval. But the lawsuit highlights real risks when fund managers sit on both sides of a deal.
Why This Matters
Continuation funds are no longer niche—13% of global PE exits in 2024 involved them, up from 5% just three years earlier. These deals often carry baked-in conflicts. When an adviser sells a company from one of its own funds to another, it’s easy to game valuation, shift liabilities, or push fees into new wrappers. And if investors aren’t fully briefed on those decisions, problems follow—sometimes in court.
The SEC’s now-vacated Private Fund Adviser Rule may be gone, but its intent remains clear: continuation fund transactions deserve scrutiny. Under Advisers Act §206(3), transactions where an adviser acts as principal must include full disclosure, fair pricing, and informed consent.
Practical Lessons for PE Sponsors
- Bring in independent voices early
Don’t wait until after the deal is priced. Get third-party fairness opinions and explain the firm’s ties to those providers. Share results with the LPAC before asking them to sign off. - Document material valuation changes
If you’re adjusting things like pension liabilities or EBITDA between funds, spell out the rationale. Who decided, what changed, and how did that affect pricing? - Engage LPACs with intent
Provide them with more than a thumbs-up/down moment. Share draft valuations, meeting notes, deal rationales, and any dissenting views. Confirm they’re empowered to act on behalf of all LPs. - Disclose compensation fully
If affiliates are involved—or if the GP benefits from fees, monitoring rights, or new carry—say so, in plain language. Clarify who pays what, and how the economics shift across vehicles. - Stay on top of Form PF reporting
For registered advisers, continuation fund transactions may trigger a reporting obligation under Form PF.
Bottom Line
Dailane v. H.I.G. is a case every private equity firm should pay attention to. Internal fund transfers—without rock-solid disclosure, valuation transparency, and LPAC oversight—can erode trust and land firms in litigation. No amount of boilerplate protects against sloppy execution. It is becoming increasingly obvious that private equity fund managers need to approach these deals with rigor, clear documentation, and governance processes that can withstand scrutiny from investors, regulators, and yes—plaintiffs’ attorneys.
How Trillium Can HelpCompliance Program Development: Trillium helps implement policies and procedures and best practices based on regulatory guidance that are specific to your firm. Developing and applying consistent policies and procedures is paramount to fulfilling a firm’s regulatory obligations and fiduciary duty.