GP-led secondaries market
Hey everyone, currently interviewing with a secondary player in their gp-led team. Wanted to ask how do you view/evaluate a secondary transaction in the pe space? I know that generally you value it similarly as from a traditional direct pe player (i.e. lbo/asset-quality etc) but given there's also now looking at LP stakes, how do you take into account pricing these and offering a fair value to LP in exiting their stake in a secondary transaction?
Thanks in advance.
Back of the envelope math lol
For GPled you are not pricing LP stakes, you are pricing the asset which will be acquired from the current fund by the continuation fund that you are backing as an LP. So the valuation is similar to normal LBO but you need to account for fees and carry you (as an LP) are paying the GP to get your net return. Can assume 1% fee and 20% carry for simplicity but usually it’s ratcheted.
The ‘fair’ pricing dynamic you mention for current LPs can be approached a number of ways I won’t mention but the main one is allowing LPs to choose whether to sell or roll into the new vehicle which will be driven mainly by whether they think the price is attractive or not (amongst other points).
This is super helpful, thank you! From a new LP / cornerstone investor perspective, would they basically take a GP or the advisor bank’s model and add a waterfall to see their return from investing in the continuation vehicle? Very interested in this space and would love to connect in DM if you would mind sparing a few minuets. Thanks!
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