Secondary Private Equity Funds: The Perfect Storm

Awareness of Options. The increase in supply of direct assets for sale has helped attract new capital for secondary funds, while concurrently expanding the number of secondary buyers. There are now at least twice as many well capitalized buyers in the market as there were only two years ago, and many secondary specialists have far exceeded fundraising goals; some by more than 50%. Some market participants believe that there has been too much money raised in the secondaries, which they speculate will drive up prices; a thought welcomed by sellers. The development of a formidable yet diverse buy-side has helped initiate very broad market activity that can now meet most sellers' needs. For example, many sellers would rather offload an entire portfolio at once, rather than having to sell bit pieces over time. Other sellers would prefer to only sell rights and minority interests, and again the range of market activity has proven this is also possible. The momentum and acceptance of creating solutions for sellers is creating visibility and comfort, quickly spiraling up the number of sellers, buyers, and deals completed. These options have led to some very notable large spin-offs that have received a good deal of press coverage, such as: Deutsche Bank, Lucent, BTexact Technologies (British Telecommunications plc), Quantum Corporation, Accenture Ltd., Wachovia Corporation, National Westminster Bank PLC, and Pioneer Corporation.