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The Wire

Jan. 26, 2022

PSG invests in SaaS platform DoseSpot, GTCR closes debut small-market fund on $2bn

Morning!

 

This is Chris, on the Wire this morning.

 

There’s some whispering going on in the private equity secondaries market. The whispers involve pricing, which has been at rich levels through last year.

 

But the concern is that could be changing as the public markets take investors on a wild ride in the early weeks of 2022. Investors have been selling as they look for guidance from the Federal Reserve about increasing interest rates to balance persistent inflation.  

 

Private equity, and more specifically the secondaries market, follows the public markets but lags by usually a quarter or two. We’ve seen public market volatility cause concerns among secondary market investors that pricing will be impacted, but it hasn’t lasted. Public markets have been on a long, general climb upwards since the global financial crisis and private equity has followed.

 

Still, buyers are starting to whisper about pricing on deals, which has been relatively rich over the past few years. Last year, pricing reached about 97 percent of net asset value for buyout funds, according to a full-year volume report from Jefferies published this week.

 

“If the volatility continues, we may see buyers grow more cautious,” a secondary adviser told me. “Where they pay 95 [percent of NAV] now, they may want to pay 90.”

 

While secondaries hasn’t seen direct impacts on sales processes yet (except maybe in portfolios with heavy public market exposure), agents are making sure potential LP sellers are aware of the kind of movements they could see in pricing.

 

What are you hearing? Hit me up with intell at cwitkowsky@buyoutsinsider.com.

 

That’s it for me! Have a great rest of your day. Hit me up with tips ‘n gossip, feedback or book recommendations at cwitkowsky@buyoutsinsider.com or find me on LinkedIn.

 

Read the full wire commentary on PE Hub ...

Also of note (may require subscriptions)

Chris Witkowsky has a piece on Buyouts about the LP burden of GP-led deals: "While secondaries activity shows no signs of slowing, LPs and GPs need to get on the same page about how to smooth out this process for institutional investors going forward."

 

EIG chief executive Blair Thomas believes solar energy, alongside wind energy, has a competitive advantage in the renewables market. (Infrastructure Investor)

 

"GTCR raised $2 billion for a new fund strategy focused on smaller deals by relying exclusively on relationships with investors that backed its latest main buyout fund." (WSJ Pro)