GP-Led Liquidity Strategies for Private Equity and Venture Capital Funds

Description

In light of tougher market conditions for traditional liquidity strategies, GPs of private equity and venture capital funds have, in recent years, pursued secondary transactions as a popular tool to achieve liquidity and rebalance portfolio holdings. These liquidity strategies are highly customizable solutions that are tailored to the specific needs of the parties.

GP-led transactions are considered the fastest growing segment of private equity, and it is estimated that they now account for roughly half of all secondary transactions. While limited partner (LP)-led transactions typically involve acquiring and replacing existing LPs in primary funds, GP-led transactions are facilitated by the fund manager coordinating either the sale of investors' interests in an underlying fund or transfer of portfolio assets from one vehicle to another. GP-led transactions are often structured around continuation vehicles in which general partners negotiate asset sales directly with secondary buyers while maintaining ownership and control of select companies and investors are given the choice of either selling their stake, transferring it into the continuation vehicle, or doing a combination of both.

The fastest growing type of GP-led liquidity solution is a GP-led single-asset transaction. Other common GP-led structures include strip sales, GP spin-outs, stapled secondary transactions, and GP-led tender offers. Counsel and deal parties must understand and manage the potential conflicts of interest and regulatory considerations with GP-led restructurings to mitigate risks and exposure to liability in the context of these transactions.

Listen as our authoritative panel explores the current trends and developments in GP-led transactions and provides best practices for structuring these deals.