PE Secondariees

Secondaries advisory right? I work on the buy side in secondaries. The secondaries space is essentially the market for existing shares of private companies. As opposed to primary deals which is raising capital, like a series B or C round of fundraising where money goes to the company’s balance sheet in exchange for newly issued shares.

Secondary deals can be done apart from a primary round or alongside one. We have seen a company raise $30M primary and offer $10M of secondary to the lead investor, for example. This could be done to reach a certain size of round while achieving specific goals for dilution, liquidity, or ownership. We work with many brokers, generally called private capital advisory groups or PCA. They show us opportunities in roughly three buckets. The common factor is sellers are seeking liquidity from typically illiquid private assets.

LP led: these are deals where a limited partner is looking to sell an interest in a GP / fund / SPV. If we bought this, my shop would become the new LP and gain the exposure to that fund in our portfolio.

GP led: these are often continuation funds where a GP rolls a fund into a new vehicle to add a few more years. This is an alternative to doing an extension and is one available path forward after the GP has taken their maximum allowed extensions. Funds typically have a set lifetime of 10-12 years and try to fully exit their positions by then. It’s like putting extra gas in the tank. Continuation funds can also provide liquidity to LPs. In most LP friendly GP led deals, LPs will have the option to cash out or roll into the vehicle, typically with incentives like no fee no carry or structure around upside / distributions (e.g., upside sharing after 2x, no carry below 3x MOIC etc). Other GP led deals are just a GP liquidating a fund, selling a single asset, or other vehicles and situations.

Direct: we specialize in direct secondaries. Some secondaries firms have the flexibility to purchase pretty much any shares - preferred or common - from a wide variety shareholders. So this could be founders, angels, current / former employees, past founders who moved on etc. These direct deals can be pretty small, like $300k to exercise some options but these sellers generally don’t have a ton of alternatives to get liquidity so they offer pretty steep discounts just to monetize the shares. We have also done tender offers, bought blocks of shares from investors who got in 10+ years ago, and helped founders get some liquidity if they’ve been in for years.

I really like the secondaries space. Genuinely knew nothing about it before I made the jump from coverage banking. It’s a cool space and great if you like alts / private markets. PCA groups get to talk to investment managers and companies all day. I’d only go back to sell side to do PCA.

You might be asked questions relating to NAV, fund level deal economics, returns by share class, some basic waterfall / cap table math. Things like that. Make sure you know some of the biggest secondaries funds and players in the space. Look into Ardian, Hamilton Lane, Harbourvest and similar. Best of luck.

Edit - just to clarify. The bot is talking mostly about fund secondaries and generally the LP / FoF space. Primary commitments to funds and LP led secondary transactions. I do secondaries PE so my response is centered more on the companies / assets and less on fund commitments.