The authors begin by clarifying the term “GP-led secondary” as “liquidation transactions instigated by fund managers or sponsors…such transactions allow managers and sponsors to continue to manage an existing portfolio of assets in a newly formed vehicle—often with new investors. They are called secondary transactions because they involve trading interests in existing funds and assets…”

They write that most GP secondary transactions have three key features:

• “Existing fund investors are offered a liquidity option with respect to one or more fund assets to either cash-out or remain invested through a new vehicle.”
• “New investors (or ‘buyers’) inject fresh capital into a newly created fund vehicle, which will acquire the target assets from the selling fund.”
• “The sponsor walks a ‘tightrope’ trying to balance their own interests, the interests of their existing investors and the buyers.”

The article then discusses and explains the top 10 considerations: selecting a deal type; tax structuring and diligence; conflicts, consents and amendments; pricing and valuation; status quo option; hidden costs of GP-led secondary deals; asset level diligence; buyer requirements; offering considerations (regulatory); transaction advisor.