Coming to America

Campbell Lutyens and 17Capital are the latest firms to boost or establish their presence in New York, so how important is it that secondaries players have an address there?

This week, 17Capital formally announced it had opened a New York office, the first overseas branch for the London-based preferred equity specialist. The firm has been doing deals in North America for years now but says its new office will “help build closer relationships with both existing and new clients”.

Having a presence in the Big Apple is the norm: 25 of the managers in our Si30 ranking of top secondaries fundraisers have offices in the city, most of them a stone’s throw from each other in Midtown.

Add advisory firms and placement agents to the mix – Campbell Lutyens is planning to almost double its New York headcount – and you’d be forgiven for thinking Midtown Manhattan was secondaries central.

So in an age of video conferencing and instant communication, why is being in New York so important?

The obvious answer is that the US accounts for more than half of the secondaries market. As much as 65 percent of Ardian’s dealflow comes from there, the firm’s US head, Benoît Verbrugghe, recently told me. This means having a local presence, both for deal sourcing and for fundraising, is vital, he said.

Then there’s the idea the US market is 18 to 24 months ahead of Europe in terms of innovative deals. Whether or not this is true depends on who you ask, but it’s clear the market there is deeper and has had to adapt to problems sooner than other regions. “People in the US aren’t any smarter, they just had the problem first,” as one New York-based market source put it.

Of course, being huddled like sardines in Midtown does have its drawbacks. One market source with an office there told me that while you have to have a presence in New York if you’re going to be a global financial institution, running into competitors along Park Avenue or in coffee shops can be a distraction. “What’s so-and-so doing? I ran into so-and-so on the sidewalk and they said X, so we should be thinking about X,” the source told me, suggesting that being clustered with competitors can lead to groupthink.

But ultimately, it’s easy to see why firms don’t want to miss out on fresh ways of thinking that spring from a city that boasts more secondaries professionals than London or Zurich. And there are benefits of more firms opening offices in New York: increased competition and diversity will benefit the market. Midtown’s estate agents need not tighten their belts just yet.

Can secondaries firms compete globally without having a presence in New York? Let me know your view: adam.l@peimedia.com