Shifting sands

The European market for direct secondaries has changed in recent years, writes Cipio managing partner Roland Dennert.

Roland Dennert, Cipio Partners’ managing partner, assesses the change in the European secondaries direct market as it moves towards single asset deals.

Over the last 10 years, the European secondaries direct market has developed significantly, largely down to two driving forces. The first is the increased length in average holding periods, which more than doubled over the past decade, according to Dow Jones Venture Source. The growing misalignment of venture capital funds and corporate investment programmes’ investment horizons with today’s business reality is creating increased demand for liquidity.

The second factor is the growing success of European technology businesses. Today, there are more mature technology businesses in Europe that have revenues of €10 million to €100 million or above, yet are still intent on growing further before selling. These companies make attractive targets for technology savvy private equity investors with strong expertise in secondaries transactions.

Both factors can be deemed responsible for creating a sizeable market in the buying and selling of single asset secondaries. Today, minority positions in mature technology businesses are being more actively traded between early stage and growth stage investors than ever before.

Roland Dennert - Cipio Partners - Capital Finance
Dennert: single asset direct secondaries on the rise

According to analysis conducted by NYPPEX, a US specialist in private equity secondaries markets, global sales of direct secondaries interests soared to $12.4 billion in 2013, up by 51 percent on the previous year. This figure is expected to further increase to reach $19.3 billion by the end of 2014.

In order to better understand the opportunities present in the European single asset secondaries direct market, Cipio Partners carried out some in-house research into this burgeoning sector. Between 2012 and 2013 around 60 deals annually were tracked through publicly available data, as well as confidential information, representing around €600 million in annual transaction value. An estimated further €400 million in undisclosed deals increased this yearly amount to €1 billion across Europe.

The research shows that, perhaps unsurprisingly, most sellers involved in secondaries direct transactions are private equity or venture capital firms. Only a small proportion of sellers analysed constitute business angels or non-traditional private equity investors. Transaction sizes tended to be modest; often below €15 million.

In terms of geography, France, Germany, Scandinavia and the UK are seeing the highest number of single asset secondaries directs. Around 85 percent of all transactions analysed involved companies located in these four regions, with other countries, such as Spain, Italy and the Benelux region lagging somewhat behind.

The median target company is 11 years old, with less than 200 employees. Software and Internet account for about 50 percent of the sectors concerned, while energy, financial services and telecommunications are less prevalent.

These findings match the reality of opportunities we’re seeing in today’s changing landscape of secondary direct deals. Historically we focused on portfolio deals, like the acquisition of 3i’s venture portfolio in 2009 (including ecommerce firm buyVIP, which was sold to Amazon a year later). Or the corporate venture portfolio acquired from an Asian semiconductor firm in 2010 (including companies like DisplayLink and PicoChip).

Since 2010, however, Cipio has built a strong business in single asset secondaries directs, purchasing shares in mature European tech companies such as Ipanema (France), MyOptique Group (UK), Cint (Sweden), Bravofly (Switzerland) and others.

Secondaries direct transactions can provide a handy solution if some shareholders need liquidity, yet others want to continue growing the business. Providing a liquidity option for shareholders has enabled some of Europe’s leading technology companies to go for the long-haul and refresh their shareholder syndicates with new, deep-pocketed investors.


Roland Dennert is a managing partner at Cipio Partners, a global  direct secondaries and advisory firm that makes investments in Europe, Israel and North America.