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Secondary Buyouts as a Proportion of Deal Activity

Secondary buyouts represent a significant proportion of buyout activity for private equity fund managers, and are becoming increasingly prominent. Since 2006, the number of secondary buyouts as a proportion of the total number of deals has remained at around 10%; however, the value of secondary buyouts as a proportion of total aggregate value of all buyouts has seen a marked increase.

In 2006, the acquisition of portfolio companies from other private equity firms accounted for less than 10% of the total value of all buyout activity and remained below 15% until 2010, when secondary buyouts reached a post-Lehman peak of over $52bn. Although this figure is far lower than the $93bn in secondary buyouts recorded in 2007, it represents 24% of the total value of all buyout activity globally – twice the proportion seen in 2009. This trend has continued into 2011, with secondary deals representing a quarter of the value of all PE deals recorded so far in the year. Although the proportional value of secondary buyouts has increased, the average value – $210mn in 2010 – is still significantly lower than the $286mn average seen in 2007 during the buyout boom-era.

Recent notable secondary deals include EQT Partners’ sale of Securitas Direct to Bain Capital and Hellman & Friedman. The deal, which was announced in June 2011, is valued at €2.3bn. Another high-value deal, announced in May 2011, is the acquisition of SPIE by a private equity consortium composed of AXA Private Equity, Clayton Dubilier & Rice and Caisse de depot et placement du Quebec. The deal will give PAI Partners a €2.1bn exit on their 2006 investment.

Keywords: private equity, buyout, secondary buyouts, dealflow