Increasing Prominence of Secondary Buyout Transactions in Global Deal Activity: 2006 - 2015 YTD

by Ciantelle Lawrence

  • 12 Jun 2015
  • PE

Secondary buyout transactions (SBOs) represent a significant proportion of deals within the private equity space and are becoming increasingly prominent among fund managers. The strategy provides attractive instant liquidity for the seller, often at a quicker pace than an IPO or trade sale. Preqin’s Buyout Deals Analyst shows that in 2006, SBOs accounted for only 9% of all private equity-backed buyout deals in terms of number of deals and 10% in terms of aggregate value. These proportions increased to 14% and 27% respectively in 2014. This increase can also be observed when looking at the raw numbers, as shown in the chart below. There were 291 secondary buyouts globally in 2006, valued at an aggregate $72bn, while in 2014 there were 501 secondary buyouts, the highest number on record, valued at $93bn.

Since the start of 2015, the total value of SBO transactions has accounted for 15% of the value of all buyout deals, contributing a total of $27bn. This aggregate deal value has come predominantly from investments in portfolio companies operating within the consumer & retail sectors, with this industry accounting for the largest proportion of total value (31%). The highest number of SBOs so far this year came from the industrials sector; this industry has accounted for 26% of all SBOs in terms of number of deals and 25% in terms of aggregate value. In the period since 2006, SBOs in industrials have accounted for almost a third (32%) of all SBOs.

In terms of location, investments in Europe have accounted for the greatest proportion of aggregate value of all SBOs globally since 2006, at 56% of the total, while the aggregate value of such investments in North America has accounted for 39%. This trend continues in 2015 too, with European SBOs making up 62% of the total, ahead of North America on 35%. However, the breakdown of secondary buyouts by number of deals reveals that Europe and North America account for a similar proportion of the global total, with SBOs in Europe accounting for 47% of all such deals since 2006 and North American deals contributing slightly less on 46%.

A recent and notable secondary transaction has been the acquisition of Verallia, a France-based manufacturer and supplier of glass bottles, by Apollo Global Management for €2.9bn. Verallia was a unit of Saint-Gobain, which had received private equity funding from Wendel in 2007. The buyout of Verallia is expected to be completed by the end of this year. With the strategy becoming increasingly prominent among fund managers who may be looking for a more complete exit from a portfolio company, the growth of SBOs as a significant part of the buyout deals landscape looks set to continue.

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