Private equity fund restructurings, which often involve secondaries investments through what is called stapled secondaries, have become quite common since the global financial crisis.
Globally, 80 percent of limited partners have received proposals for a fund restructuring, while as much as 95 percent of European LPs have received such proposals, according to Coller Capital’s most recent global private equity barometer released this week.
The report indicates that one in five LPs have received more than five proposals.
It seems that LPs are willing to participate in the fund restructurings, as 79 percent of LPs told Coller they have actually taken part in one or more PE fund restructurings since the global financial crisis.
Almost 40 percent of LPs have been able to attain liquidity through a fund restructuring but North American LPs have been more successful at it than their European counterparts. More than 60 percent of North American LPs compared with 26 percent of European LPs have received liquidity as part of a restructuring.
Restructurings involving a stapled secondaries transaction, when the buyer of an LP interest also makes a commitment to the GP’s new fund, have also become more common since the global financial crisis. But the practice is under the microscope of the Securities and Exchange Commission, as there’s a concern that LPs might not be getting all the value they would hope for in a secondaries stapled transaction.
One market participant, who declined to speak on the record, said that the increase in the number of stapled transactions occurring during a restructuring really started to pick up in 2014 and is currently “in full force”.