Market Insight
September 05, 2024

Expanding the Toolkit: How GP-Led Transactions Can Enhance Secondary Strategies

About the Author

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Steve Lessar

Partner

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Veena Isaac

Partner

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Konnin Tam

Partner

About the Author

avatar
Steve Lessar

Partner

avatar
Veena Isaac

Partner

avatar
Konnin Tam

Partner

Innovation has helped to destigmatize GP-led transactions, establishing the practice as a mainstream liquidity management tool for GPs today. In this paper, we explore how GP-led deals can offer concentrated exposure to high-quality managers and assets, compounding the overall advantages of secondary strategies.

Key Takeaways

  • GP-led deals—those through which general partners negotiate asset sales directly with secondary buyers—have been the fastest growing segment of the private equity secondary market since 2018, accounting for almost half of all secondaries transactions in 2022 and 2023.¹ In our view, these transactions have now become firmly established as a mainstream liquidity management tool for GPs.
  • ·The rising popularity of GP-led deals is a result of continued innovation and a slowdown in traditional exit avenues like initial public offerings (IPO) and mergers & acquisitions (M&A), especially after the Federal Reserve started tightening monetary policy in March 2022. That said, we believe that GP-led deal volume will remain strong even when these traditional exit avenues normalize, as these transactions have become entrenched as a key component of the private markets ecosystem.
  • GP-led transactions, in our view, have the potential to provide mutual benefits for both limited partners and financial sponsors alike, including access to early liquidity, and the ability to remain invested in high-performing “trophy assets” for longer than would otherwise be feasible.
  • GP-led transactions can add higher concentration compared to LP-led transactions, which can provide focused exposure to premium assets with attractive long-term growth potential. Deployed alongside LP-led deals, GP-led transactions can also enhance overall diversification in secondary portfolios.
  • In our view, the potential benefits brought on by exposure to GP-led transactions compound the overall advantages associated with secondaries strategies, namely vintage and manager diversification, enhanced due diligence, reduced operational and managerial complexity, and the potential for more consistent capital distributions and returns.
  • Like the broader secondaries market, we believe the potential for investment success in GP-led deals is based on: a) an investment manager’s relationships with general partners; b) the scale and flexibility of the investment platform to provide innovative capital solutions and lead transactions—e.g., to be a price setter instead of a price taker; and perhaps most importantly c) the ability to conduct deep company-level due diligence, leveraging information, resources and expertise from a direct investor’s tool kit.

The information herein is provided for educational purposes only and should not be construed as financial or investment advice, nor should any information in this document be relied on when making an investment decision. Opinions and views expressed reflect the current opinions and views of the authors and Apollo Analysts as of the date hereof and are subject to change. Please see the end of this document for important disclosure information.

Important Disclosure Information

This presentation is for educational purposes only and should not be treated as research. This presentation may not be distributed, transmitted or otherwise communicated to others, in whole or in part, without the express written consent of Apollo Global Management, Inc. (together with its subsidiaries, “Apollo”).

The views and opinions expressed in this presentation are the views and opinions of the author(s) of the White Paper. They do not necessarily reflect the views and opinions of Apollo and are subject to change at any time without notice. Further, Apollo and its affiliates may have positions (long or short) or engage in securities transactions that are not consistent with the information and views expressed in this presentation. There can be no assurance that an investment strategy will be successful. Historic market trends are not reliable indicators of actual future market behavior or future performance of any particular investment which may differ materially, and should not be relied upon as such. Target allocations contained herein are subject to change. There is no assurance that the target allocations will be achieved, and actual allocations may be significantly different than that shown here. This presentation does not constitute an offer of any service or product of Apollo. It is not an invitation by or on behalf of Apollo to any person to buy or sell any security or to adopt any investment strategy, and shall not form the basis of, nor may it accompany nor form part of, any right or contract to buy or sell any security or to adopt any investment strategy. Nothing herein should be taken as investment advice or a recommendation to enter into any transaction.

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