Secondary growth: Navigating the trends

Increased transaction volumes for GP-led deals in recent years have buoyed the secondary market to new heights, with today’s GP-led space featuring some of the highest quality assets managed by some of the best-performing GPs within their areas of focus. The rise of GP-led deals has been accompanied by increasing transaction sizes, with more than 25 GP-led deals valued at $1 billion or more completed in 2021.⁵ The rapid growth of the market and increasing deal sizes have led to more opportunities for investors, but at the same time there is a growing shortage of capital with a mandate to invest these transactions.

Overall, there is far more supply of GP-led opportunities today than available capital to invest - particularly given the desire by many secondary managers to maintain high levels of diversification within a typical secondary fund strategy. This dynamic has led some managers to form dedicated pools of capital focused on GP-led deals or other types of continuation solutions - taking advantage of this attractive market opportunity by investing in calibrated assets with a compelling risk/return profile.

For experienced secondary players with capital to deploy, it's a buyer’s market with abundant supply. But not all deals are created equal, and GP-led transactions are far from simple or straightforward. For example, sourcing and structuring a new transaction requires deep expertise and relationships to manage a process that may take six to nine months to complete. Due diligence for GP-led deals is also often labor and resource intensive and requires a distinct skill set to, among other things, ensure that all parties’ interests are properly aligned on areas such as pricing and valuation, timing, vehicle structure, and economic terms.