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Financial Sponsor Secondary Market Year-End Review 2019

Mar 2 2020

Financial Sponsor Secondary Market Year-End Review 2019

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A third year of double digit growth has solidified financial sponsor secondary transactions, or sponsored secondaries, as a key part of the overall secondary market.  In 2019, Lazard estimates that $28 billion of volume closed across 58 transactions.  This represents growth in transacted volume of ~15% over 2018 and more than 70% over 2017.  The growth and expansion of the sponsor secondary market is supported by positive supply and demand dynamics that we expected to continue in the near future.

Another record year, the Americas remain the most active region, larger deals are brought to market and concentrated portfolios become in vouge

Lazard estimates that approximately $48 billion of transaction volume was either closed, failed or brought to market, as of December 31, 2019. Of the $48 billion, we estimate $28 billion closed, which represents an ~15% increase from 2018 and 70%+ increase from 2017.

Financial sponser secondary market volume estimates

The Americas continued to represent the majority of the total transaction volume in 2019 on a dollar basis, driven both by number of transactions brought to market and increase in transaction sizes. Europe regained some of its lost share from 2018, largely driven by a handful of $1+ billion transactions despite a slight decrease in the number of transactions brought to market. Asia had the greatest decline in terms of both transaction volume and count.

sponser secondary volume by geography

Lazard estimates suggest that the distribution of transactions by size shifted noticeably in 2019 vs. 2018 and 2017. The number of large-cap transactions significantly increased relative to that of the smaller end of the market, mostly driven by efforts in the United States. Of the closed transactions in 2019, the top 10 deals accounted for more than 45% of transaction volume, of which nine we estimated were $1+ billion transactions.

 Financial sponsor secondary transactions segmented by geography and size

In 2019, financial sponsors increasingly utilized the secondary market to achieve liquidity solutions for more concentrated portfolios. With sponsors becoming better versed in the opportunities the secondary market can offer, there has been a rise in acceptance of secondary transactions as alternatives to traditional exits pathways. Consequently, more sponsors used the secondary market as the preferred avenue to generate liquidity for prized assets, especially assets that have strong growth prospects.

2019 sponsor secondary transaction breakdown

In our Financial Sponsor Secondary Market Year-End Review for 2019, we highlight the following themes:

highlighted themes in our report

Lazard believes that the sponsor secondary market will represent a meaningful percentage of the broader secondary market in 2020, as these transactions are no longer spoken in the quiet corners of the market, but rather as a topic that has strategic importance for many firms.

 

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