GP-led restructurings: Could there be an app for that?

Applying truly innovative technology to GP-led processes could open up billions in unrealised NAV to secondaries buyers.

Imagine a world where GPs can run tender offers and fund restructurings at the push of a button, monitoring the process via an app; one in which the process for rejecting or accepting a bid offer on your fund stake is as easy as swiping left or right on your smartphone.

A fanciful idea, but something akin to it might not be far off. Last week advisory firm Park Hill partnered with Nasdaq Private Market to launch a platform aimed at standardising procedures around GP-led processes and making them more efficient.

The idea is simple. Running a GP-led process can be incredibly complex with a lot of moving parts, cats to herd, ‘I’s to dot and ‘T’s to cross. Think transfer documents, checking for ECI, anti-money laundering, KYC, signing sales and purchase agreements – all the not-so-exciting back office elements of a secondaries transaction process that are crucial to a deal closing. What if there was a way to bring all these processes onto one electronic platform?

That’s the aim behind Park Hill and NPM’s tie-up. “If we could bring some standardisation and a technology interface to the execution of these deals, it should create more engagement with the market, which should make it easier for GPs to execute deals and propel the growth of the market even further,” Jon Costello, Park Hill’s head of secondaries advisory, tells us.

A common complaint from LPs, says Costello, is that GP-led processes are too difficult to understand. If these processes can be made more standardised, it’s hoped LPs will be more receptive to deals, increasing participation rates. Costs too should come down, with legal and administrative tasks standardised and undertaken electronically, leaving more net proceeds for LPs, at least in theory.

NPM already manages a platform that provides liquidity to individual investors in private companies. Tender offers on direct shares tend to have high take-up rates that can near 90 percent, whereas average take up rates in tender offers on limited partnerships tend to hover around the 10-20 percent mark.

This has meant tenders have typically been run on multi-billion dollar funds, as an advisor having to contact 100 LPs in a given process would much rather see $500 million of net asset value trade from a $5 billion fund than $50 million trade from a $500 million fund. Both scenarios require the same amount of legwork.

It follows, then, that a tech platform that can help GP-led processes benefit from economies of scale, could also help open up the lower- and mid-markets for private fund stakes as advisors realise that smaller funds can be worth their while.

Will Park Hill/NPM’s platform be successful? It’s hard to say. Many have tried before to launch online trading platforms either to match buyers and sellers of fund stakes or for LPs to trade interests directly, with varying success. The key difference in Park Hill/NPM’s latest venture seems to be that it isn’t cutting out the human element – the crucial role that advisors play in knowing their clients’ needs and understanding the dynamics of a deal can’t be robotised just yet. But if it can crack the GP-led secondaries market with the aid of a truly groundbreaking tech platform that’s adopted by GPs and LPs alike, it could open up hundreds of billions in NAV for secondaries buyers.

Now that would be worth swiping right for.

Write to the author: or @adamtuyenle