Managing Director & Senior Partner; Global Leader of Mergers & Acquisitions
According to some of the world’s most respected business publications, secondary buyouts (secondaries)—that is, private companies whose ownership passes from one private-equity (PE) sponsor to another—have little to recommend them. Consider a few representative mentions of secondaries—sometimes called “pass-the-parcel” deals—in the business press:
According to an article in the February 25, 2010, issue of the
An article in the April 19, 2010,
On August 22, 2012, an article on
Such critiques have taken on additional resonance as secondary buyouts have become an increasingly prominent feature of the PE landscape. (See Exhibit 1.) Secondary and later-stage deal volume in the first nine months of 2012 was roughly $56 billion, accounting for 34 percent of PE deal volume, according to Preqin, a clearinghouse for information on alternative investments. Further, activity in secondary and later-stage transactions is likely to remain high for the foreseeable future, owing to the steep decline in the volume of public-to-private deals, the moribund state of the market for initial public offerings (IPOs), continuing efforts by PE firms to deploy capital accumulated during the buyout boom, and pressure from investors for the return of some of the funds they invested in earlier years.