Growing Prominence of Secondary Buyouts – December 2013

by Jonathan Parker

  • 20 Dec 2013
  • PE

In recent years, it has become increasingly common for private equity fund managers to purchase companies from other private equity firms. These secondary buyout acquisitions, often referred to as ‘pass-the-parcel’ deals, have comprised 13% of all private equity-backed buyout deals globally in 2013 to date, which is the highest proportion in the period 2006 to present. This deal type represented 10% of all deals in each of 2006 and 2007, before falling to 8% in 2008 and reaching a low of 5% in 2009. The following year saw the proportion of deals classed as secondary buyouts recover to 10%, before rising to 11% in 2011 and then to 12% in 2012. Despite the increasing prominence of secondary buyout deals in terms of number, the aggregate value of these investments has been far more fluctuant. In the year to date, secondary buyouts have accounted for a quarter of all deals by aggregate value, significantly below the 31% seen in 2012 but in line with the 2010 and 2011 proportions, at 27% and 26%, respectively. 

The volume of secondary acquisitions in 2013 is unlikely to surpass the 2012 figures, with 344 such deals globally in the year so far valued at a total of $65.8bn, compared to 384 valued at $80.7bn in the previous year. Similarly, the first 11 months of the year saw 319 secondary deals with an aggregate value of $64.8bn, 4% lower in number and 13% lower in value than the same period last year. Since 2006, Carlyle Group has participated in more secondary buyout deals than any other private equity firm (38). This is followed by Equistone Partners Europe (29), Kohlberg Kravis Roberts (23) and Blackstone Group (22). However, with 48% of Charterhouse Capital Partners’ buyout deals since 2006 accounted for by secondary acquisitions, this fund manager has completed a higher relative number of secondary deals than any other. Court Square Capital Partners follows, on 47%, while 39% of deals by IK Investment Partners have involved the acquisition of another PE firm’s stake in a company. LBO France and Cinven complete the top 5, with 38% and 35% of deals, respectively, coming from secondary acquisitions. 

Of all private equity-backed secondary buyout deals globally in the year to date, 46% have occurred in Europe, 45% in North America, 6% in Asia and 3% in remaining countries. Europe also saw the highest number of secondary buyouts as a proportion of all deals in the region, with 18% of investments in the year to date classed as secondary acquisitions. North America saw secondary buyout deals comprise 11% of all private equity-backed buyout deals, with 8% of deals in Asia classed as this investment type.

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