GP-led secondaries: From large-cap to lower mid-market

With GP-led secondaries becoming a mainstay in the private equity
exit toolbox, Mergermarket's funds editor Harriet Matthews and
senior private equity reporter Rachel Lewis discuss the outlook
for this growing part of the private equity market. In a guest
interview, Elena Laleh, managing director at Kline Hill Partners,
discusses the secondaries investor’s European and North American
strategy, highlighting the sizeable opportunity to be found in
GP-leds in the lower mid-market.


With EUR 47.3bn raised across 16 secondaries funds active in
Europe in 2023, versus EUR 30bn across 18 funds in 2022, LP
demand for secondaries strategies shows no sign of slowing in the
face of a tough fundraising market.


While megacap fundraises of EUR 10bn-plus from the likes of
Goldman Sachs, Glendower Capital and Lexington Partners typically
bolster secondaries fundraising volume, with large-cap deals
grabbing headlines, there is also ample opportunity in the lower
mid-market, where GPs are also looking to continuation funds as
an exit option, but investor capital is more scarce.


Elena Laleh discusses Kline Hill’s focus on “trophy assets” in
this market segment, which sees it engaging in deals of less than
EUR 250m in size and deploying around two-thirds of its capital
in the US and one third in Europe.


She also shares her view on whether an anticipated exits uptick
will affect GP-led secondaries dealflow, and discusses the
importance of due diligence, returns and alignment.


Following the interview, the Mergermarket team dissects the key
takeaways, sharing data on PE exits in the lower mid-market and
recent reporting on secondaries activity in this market segment.


Introduction – 0:38


Current state of the GP-leds market – 1:34


Secondaries fundraising: data recap and LP appetite – 4:35


Interview with Elena Laleh, Kline Hill Partners – 8:48


Kline Hill’s GP-led strategy and lower mid-market focus –
9:56

US versus European GP-led secondaries market dynamics – 11:41

GP-led secondaries and exit environment optimism – 12:52

Valuations in GP-led deals – 15:58

Returns in the GP-led secondaries market – 18:24

Capital supply in the secondaries market – 21:15

Kline Hill’s view on alignment – 23:37



Key takeaways – 25:16


Lower mid-market PE exits – 26:15


GP due diligence in secondaries deals – 29:06


Mergermarket reporting on recent lower mid-market GP-leds – 31:03


Adviser adaptation and market consolidation – 33:20


You can listen to the podcast HERE, as well as your favourite
podcasting platforms, including Spotify and Apple Podcasts.


If you would like to hear more podcasts produced by ION
Analytics, you can access the ION Analytics channel on Apple
Podcasts.


Theme music: 2012 Kick Up The Fire