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, developed creative new ways for achieving liquidity for their funds and limited partners. These new liquidity strategies include fund-level strategies as well as portfolio company-level recapitalization.

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 the sale of investors' interests in an underlying fund. 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.

The most common type of GP-led liquidity solution is a GP-led secondary fund restructuring. Other types of fund restructuring include single-asset fund restructurings, strip sales, 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.