Secondary Transactions In Private Equity: Planning, Governance And Exit Readiness

Key takeaways

• Sponsor-to-sponsor secondary transactions are an interesting alternative for sponsors looking to sell their stake in portfolio companies when other exit opportunities are unavailable or suboptimal.
• On the sell-side, careful planning and negotiation is required to ensure that the portfolio company is on board and cooperates with the sale process.
• On the buy-side, the incoming investor needs to structure its investment and the portfolio company's governance documents such that a streamlined exit route is available for the future and can be executed in a timely manner, with minimal hurdles and in line with its investment horizon.

Introduction

Private equity investors are increasingly turning to sponsor-to-sponsor secondary sale transactions, both to achieve timely exits and to deploy capital efficiently when other pathways for an exit are unavailable or suboptimal. In a secondary transaction, an existing sponsor sells all or a portion of