How has Brexit affected GP-led deals?
There’s some evidence that deals currently in play have stopped, but less than you would have expected. Dealmakers had been quiet in the period leading up to the referendum and then immediately before the referendum, there was a reduced level of deal activity.
Dealflow will bounce back. We’re in a period of uncertainty now, so the question is whether it will be weeks or months before we start finding opportunities. There will be people looking for opportunities and clearly the fall in the pound may help people who have dollars to invest.
Can secondaries be the white knight in this post-Brexit environment?
Private equity is good at finding opportunities in volatile and interesting times, and the secondaries market in particular is very well situated for two reasons.
One is that, given it may be difficult to exit from some assets, there will be more demand for fund restructurings and extensions. That’s one of the things we’ve been seeing in the European secondaries market and that will be a potential area of growth.
There may be good assets out there, but because of the current turmoil in the market, some sponsors may not be able to exit from them when they expected. They may want a bit more time and capital to restructure and give a bit more runway to realise on those investments.
How will the UK leaving the EU affect the legal aspects of deals and complex restructurings?
It all depends on what terms Britain actually exits and what the relationship is between the continent and Britain. It’s in everyone’s interest to continue to allow the free flow of capital across borders, and most people on the continent and in Britain don’t want to discourage investment in any way.
How is Brexit affecting LPs’ views on selling their stakes?
I haven’t seen evidence of an increase in distressed sellers, but that might happen.
As things are dislocated, all institutional investors are going to be looking very carefully at the risk allocations to Europe, the eurozone, the EU, Britain, and it’s possible that might lead to some rebalancing of portfolios.
The secondaries market is immensely creative and an area where the most interesting private equity deals are being done to construct solutions that help GPs and LPs, and help new money come in. That kind of creative thinking is exactly what the private equity industry needs in times of rapid change.
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