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By: Eric Chow and Louis Lehot, partners at Foley & Lardner LLP, a US-headquartered international law firm.
In a time when exit strategies have pivoted, and options might be more limited, it is no surprise that secondary buyouts have rebounded. According to recent coverage from PitchBook, secondary buyouts are making up a larger share of private equity exits as firms look to speed up sales of portfolio companies.
What the data indicates
In a secondary buyout (SBO), a private equity firm sells a portfolio company to another private equity firm. These can be very attractive options for the speed and efficiency they offer and the instant liquidity for the seller. PitchBook's data indicates these deals accounted for 30.5% of PE exits in the first quarter of this year, compared to 25.2% in the same time frame in 2023. Notably, they come commensurate with a decrease in total value and volume of PE exits.
Their coverage indicates a need for more certainty or predictability in deals today, with PE firms looking to close faster. There is also a large amount of dry powder at PE firms today, so they might be better positioned to make investments and acquisitions than other types of investors.
What factors should PE firms consider
When considering a secondary buyout, there are numerous factors that investors should consider. Speed, efficiency, and liquidity value are positive considerations. On the flip side, the data does not indicate t...................... To view our full article Click here
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