The funny thing about Ardian is that it doesn’t consider itself the biggest player in the secondaries market.
Despite being ranked number one in Secondaries Investor‘s 2016 Si 30 ranking of the top secondaries fundraisers over the last five years, as well as amassing the largest-ever pool of dedicated capital with its latest fund in April, the firm, which is celebrating its 20th anniversary, remains humble about its place in the market.
“Some people are very good at being a bit more exotic. We are boring,” Benoît Verbrugghe, head of Ardian US, tells Secondaries Investor. “We want to buy well-known assets where you have quality and where you can have visibility. The world is a little bit weird today.”
And Verbrugghe has the experience to put ‘a little weird’ – he cites Brexit, volatility and exchange rates – in context. He has been at the Paris-headquartered AXA spinout for 17 of its 20 years. Starting as an intern at AXA Private Equity in 1999, he rose through the ranks to become head of the firm’s US operations in 2010. The 2009 global financial crisis showed him the value of acquiring good quality stakes.
Ardian’s ASF Fund VII, which includes $10.8 billion for secondaries, is now 25 percent invested through eight deals, according to Verbrugghe, who says the firm plans to execute at least another 12 transactions from the fund.
Deal volume, which is expected to fall below $40 billion for 2016, isn’t something that worries Verbrugghe: Ardian is in discussions with at least six sellers on deals each worth $1 billion or more. He says its ability to win such large transactions is due to three factors: its database of fund information, the way it executes deals and its track record with spin-outs.
“When you sell a portfolio of 200 interests, what you want to get is execution,” Verbrugghe says. Sellers need to be confident a buyer can underwrite a deal, and Ardian can do that by relying on the information in its proprietary database, he says.
Ardian isn’t just a buyer in the secondaries market, it is also a seller. As of October, the firm was near to closing a deal to sell stakes held in its 1999, 2001 and 2004-vintage secondaries funds and had hired Campbell Lutyens to run the disposal.
And while the firm hasn’t participated in any GP-led restructurings as a buyer, it has sold limited partner stakes in funds undergoing restructurings, although the experience was far from pleasurable.
“At the beginning, clearly we were not happy because the process was not transparent, it was not well organised,” he says. Those deals were ultimately successful for the firm, although Verbrugghe declined to comment on details.
While processes around GP-led deals have improved significantly, it’s still not a part of the market Ardian wants to invest in because the opportunities are questionable, he adds.
The firm has also steered clear of acquiring listed vehicles in take-private deals. When Secondaries Investor spoke to Verbrugghe, Boston-headquartered HarbourVest Partners was in the middle of a bidding war for the portfolio of SVG Capital, a London-listed private equity investor.
That deal has since closed, after a five-week battle. While some market participants say the transaction has brought about a new era of aggressive secondaries buyers, Verbrugghe isn’t so sure.
“It’s one transaction among many transactions,” he says. “It’s like every transaction in the world. You have a buyer, you have a seller, you have a negotiation. Sometimes you have a fight between the two. Is it aggressive or is it business as usual? I don’t know.”
Ardian hasn’t taken listed investment vehicles private yet, although it did look at the Conversus Capital deal HarbourVest ultimately made in 2012, and it does have the resources to underwrite such complex deals, Verbrugghe says. For now, the secondaries world’s biggest player is comfortable with the deals it knows it can execute well.
“It’s not difficult to win a transaction, you just have to put the best price on the table and you win,” Verbrugghe says. “You have to stay professional and say, at this price, I’m out. If one day there is a downturn – and one day it will happen – you have to make sure the portfolio you build over time will go through the crisis without any issues.”