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GP-led transaction activity analysis
Type of GP-led transactions in 2022¹
Strategy of funds sold in 2022¹
- Split by transaction value (purchase price plus unfunded) per respondent
- The volume of GP-led transactions fell 27% from 2021 to 2022 with continuation funds representing the vast majority of transaction volume, approximately 90% versus 88% last year. Continuation funds can be an effective way for GPs to generate liquidity especially where GP alignment is tailored, as purchase prices for these customized sales tend to be significantly higher than simple fund-level monetization.
- Tender offers grew slightly, mainly in the first half of the year, but became more difficult to execute as pricing for funds continued to deteriorate over the course of 2022 resulting in tepid sell side take up from LPs. Asset strip sales grew out of favor declining from 4% to 1% as bear market sentiment across buyers made it more difficult to execute these transactions.
- Single-asset continuation funds increased by 4% to take a 48% share of the market while multi-asset continuation funds fell slightly to take a 43% share. In last year’s challenging dealmaking environment, asset quality was prioritized over diversification, making single-asset deals involving trophy assets more appealing to investors over mixed-quality multi-asset continuation funds.
- Buyout funds represented the bulk of the activity in the GP-led market space as there is not as much capital allocated to specialized strategies such as venture, infrastructure, real estate, and credit. However, we believe demand will grow over time for these strategies as the current environment is creating a need for liquidity across asset classes and investors recognize that there is less competition in the non-buyout segments of the market. Energy volumes will remain low due to a continued focus on ESG and lack of clarity around exits despite higher income, particularly from oil and gas producing projects.
Average ratio of secondary to stapled primary capital in GP-led transactions¹
- Stapled primary capital refers to a commitment to a fund for the same GP. For every $2.6 of capital for secondary assets deployed, $1 of primary capital was committed in 2022 for transactions with a stapled element on average
- A number of high-quality GPs sought stapled capital in 2022 as the stigma attached to these transactions dissipated. Generally, there is a strong correlation between the perceived quality of the GP and the amount of staple.
- The average primary stapled ratio for GP-led transactions in 2022, which predominantly apply to tender offers, held steady at 2021’s ratio of 2.6 secondary dollars to every 1 primary dollar. Most of the successful tender-stapled transactions occurred in the first half of 2022 and were carried over from the momentum of deal flow in 2021. Several large transactions were launched in the second half of 2022 with lower ratios, but many of these offerings were abandoned or resulted in lower seller take up due to bids reflecting steeper discounts to NAV than expected.
Type of GP-led transactions in 2022¹
Strategy of funds sold in 2022¹
- Split by transaction value (purchase price plus unfunded) per respondent
- The volume of GP-led transactions fell 27% from 2021 to 2022 with continuation funds representing the vast majority of transaction volume, approximately 90% versus 88% last year. Continuation funds can be an effective way for GPs to generate liquidity especially where GP alignment is tailored, as purchase prices for these customized sales tend to be significantly higher than simple fund-level monetization.
- Tender offers grew slightly, mainly in the first half of the year, but became more difficult to execute as pricing for funds continued to deteriorate over the course of 2022 resulting in tepid sell side take up from LPs. Asset strip sales grew out of favor declining from 4% to 1% as bear market sentiment across buyers made it more difficult to execute these transactions.
- Single-asset continuation funds increased by 4% to take a 48% share of the market while multi-asset funds fell slightly to take a 43% share. In last year’s challenging dealmaking environment, asset quality was prioritized over diversification, making single-asset deals involving trophy assets more appealing to investors over mixed-quality multi-asset continuation funds.
- Buyout funds represented the bulk of activity in GP-led market activity as there is not as much capital allocated to specialized strategies such as venture, infrastructure, real estate, and credit. However, we believe demand will grow over time for these strategies as the current environment is creating a need for liquidity across asset classes and investors recognize that there is less competition in the non-buyout segments of the market. Energy volumes will remain low due to a continued focus on ESG and lack of clarity around exits despite higher income particularly from oil and gas producing projects.
Average ratio of secondary to stapled primary capital in GP-led transactions¹
- Stapled primary capital refers to a commitment to a fund for the same GP. For every $2.6 of capital for secondary assets deployed, $1 of primary capital was committed in 2022 for transactions with a stapled element on average
- A number of high-quality GPs sought stapled capital in 2022 as the stigma attached to these transactions dissipated. Generally, there is a strong correlation between the perceived quality of the GP and the amount of staple.
- The average primary stapled ratio for GP-led transactions in 2022, which predominantly apply to tender offers, held steady at 2021’s ratio of 2.6 secondary dollars to every 1 primary dollar. Most of the successful tender-stapled transactions occurred in the first half of 2022 and were carried over from the momentum of deal flow in 2021. Several large transactions were launched in the second half of 2022 with lower ratios, but many of these offerings were abandoned or resulted in lower seller take up due to bids reflecting steeper discounts to NAV than expected.
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