Credit vs M&A vs Secondaries
Hi folks,
I'm m&a analyst 2 in London now, fig m&a. Strongly considering a move, maybe to a private credit. I've read "Credit Investor Handbook" by Gatto, absolutely love how he thinks about the business, from credit perspective. Although, ith declining interest rates i am not sure about sector perspectives (+ rumours about credit bubble).
I can also go to secondaries, but again, nothing looks sexy enough there to me, although the strategy seems legit
Any thoughts?
Based on the most helpful WSO content, here are some insights on Credit, M&A, and Secondaries:
Private Credit
M&A
Secondaries
Comparative Insights
Conclusion
For more detailed discussions and personal experiences, you might want to explore specific threads on WSO related to each sector.
Sources: Private Credit Secondaries Case Study Insight, Private Equity vs. Private Credit, Private Equity vs. Private Credit, MF Liquid Credit vs Private Credit at the analyst level, Private Credit Resources and Prep
Bump
While secondaries has grown it’s still a pretty niche asset class / strategy. Majority of funds are doing LP stakes or large GP led portfolio deals at some discount to NAV. Smaller subset of funds are doing mostly single asset and direct deals. And large platforms are increasingly launching dedicated GP led strategies. Check some industry reports from big PCA groups and see if it looks interesting to you. It’s a cool seat if you enjoy playing in a somewhat abstracted layer in the private markets and structuring interesting deals. A lot of secondary transactions involve continuation vehicles and other SPVs to get a deal done. It’s been a hot space recently with the relative lack of liquidity necessitating deals to generate DPI in old funds or free up capital to make new fund commitments. At the current inflection point for rates I wouldn’t expect discounts to remain as high as the last few years but there will still be a lot of secondaries deal flow as capital slowly frees up over the next year or two of exits in a better rates environment. Really long backlog of scaled private companies that will likely sell or go public between now and ~2027-2030.
Depends what you enjoy despite how cliche that sounds.
Secondaries is quite niche and I left the industry because of how little seats there are and I'm now back in banking. I'd just consider that the grass isn't always greener and to be resolute in your decision, don't just goto secondaries because you have no other option.
Did you go to PCA? How common is back and forth from PCA to secondaries investing?
No, I previously worked in industrials banking at a BB so just quit secondaries investing and went to a MM IB instead
Re private credit - can you expand on your concerns? Those transitioning from M&A/PE will likely enter a more stable pipeline business. In my experience, whilst acquisition financings are the most enjoyable, refinancings and amendments create an activity floor that helps during uncertain times (so far).
Private credit is broad, with roles varying greatly based on fund strategy. E.g. Underwriting a turnaround financing involves different complexities compared to working on a recent MF buyout. Asset-based financing is the latest trend, in case you’re interested.
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