Direct Secondaries
Guys,
I am a bit fuzzy on the concepts of direct secondaries - basically it is similar to the traditional LBO transactions of those buyout shops but these are sold on a direct basis to a secondaries fund?
So when a secondaries fund purchased these companies - how are they funding the transaction? Are they raising new round of funding and refinance the existing debt?
Thanks!
Direct secondaries investment firms aren’t using debt, at least in my space. We buy existing shares in VC-backed private companies. The cash goes to the seller, not the company. Doesn’t touch the balance sheet. Sometimes we go through the companies so they buy back the securities from the seller and issue us stock. Not as common as just replacing them on the cap table, though. 99% of the time the board has a ROFR and can block transactions or buy the shares themselves. Gotta go directly through the CEO to get these things done.
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