Greenhill: H1 deal value hit $27bn record

Secondaries transaction volumes hit a record level in the first half of this year, exceeding the previous high point by $5 billion.

The first six months of the year saw $27 billion of secondaries trades, according to the Secondary Market Trends & Outlook report by advisor Greenhill Cogent. This compares with $22 billion registered in the first half of last year – the previous first-half record.

An increase in the number of deals worth more than $500 million was a significant driver, the report noted. There were 11 such transactions during the first half, accounting for 40 percent of the overall transaction volume. Seven deals were over $1 billion in size.

Greenhill expects 2018 to break last year’s record of $58 billion for the full year.

The only structural factor driving volume has been the need for funds of funds to wind down mature vehicles, according to the report. Funds of funds accounted for 15 percent of deals by volume in the first half. The other factors were more opportunistic in nature, such as limited partners taking advantage of high pricing or choosing to shift their portfolios’ strategy using the secondaries market.

“It has become increasingly common for a new CIO or asset class head to pursue a secondary sale as one of the first orders of business,” the report noted. The firm estimates that selling driven by this motivator represented more than 20 percent of LPs, by number that are pursuing portfolio sales in the first half.

GP-led transactions accounted for 26 percent of total volume, equivalent to $7 billion. By transaction number, 58 percent of these occurred in Europe, 33 percent in the Americas and 8 percent in Asia. GP-led deals accounted for $14 billion last year, around 24 percent of the total. Greenhill expects LPs to be more proactive when it comes to such deals, which could top $20 billion by the end of this year.

“In certain transactions, the balance of the benefits tips towards the GP,” the firm noted. “As such, we expect LPs to continue to seek a greater voice earlier in the conception of GP-led transactions in the form of advisor selection, transaction structure, LP/LPAC approval thresholds and process/timeline.”

The average bid for all strategies was 93 percent of net asset value in the first half, the same as 2017. The average price of buyout and real estate funds was slightly down on 2017, with venture capital slightly up.