PCA groups advise companies selling secondary stakes in the private markets. I am in buy side secondaries and all the PCA groups show us deals. There are GP led, LP led, and direct secondaries. GP is a sponsor doing a continuation fund. LP is selling the LP stake in a fund generally to FoF and SWF. Direct secondaries is directly transferring existing shares outside of a primary round of financing. No new shares are created you just switch the name on the cap table essentially. We buy direct secondary stakes from founders and VC funds.

 

What the exit opps look like? Is it possible to exit to traditional buyout/secondaries PE?

 

Do folks in PCA find the work intellectually stimulating?

 

Answering this from the perspective of someone who works on GP-leds so can't comment on LP-leds. I personally love it and think it's the perfect balance of quantitatively and qualitatively intellectually stimulating. As you are a generalist, you get to look at a wide variety of industries, companies and business models which is exactly what I wanted in a role. I also find the market dynamics within secondaries to be fascinating. There is a wide variety of transaction structures so you can get creative in the levers you use to try and improve pricing and get a deal across the line. Finally, you don't go unnecessarily deep on diligence because the buyers (secondary investors) in this market are ultimately passive investors and don't need to turn over every stone. That last point can be a good or a bad thing depending on what you want to do long term. For me, it's a great thing as I want to stay in secondaries and I think drilling that deep into a company would drive me crazy.

 

Thanks for the color man. Is it possible to move from PCA to M&A in firms like EVR/PJT/LAZ? 

 
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You essentially advise GPs (Sponsors) on continuation funds, and this is called Secondary Advisory, note it's different from secondary buyout. 

Process wise when you work its exactly the same as M&A. You provide an IM which is more or less similar to as one you do in M&A but you pitch to Secondaries fund, i.e., Blackstone Strategic Partners, Glendower, HarbourVest Partners, etc. An example of how it works is that a GP for some reason want to hold its portfolio company longer but cannot (could be to meet threshold IRR) so they would "sell" the portco into a continuation fund where for instance Blackstone Strategic Partners would come in as an LP. 

Biggest players are Evercore and Lazard and they have a majority of the market share but they are a few upcoming.

Exit is limited, would say almost impossible to go to PE and skillset is very different. 

 

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