H1 2023 Secondary Market Overview
Category: Secondary Market Research Year: 2023
September 18, 2023
2023 is shaping up to be a rollercoaster year: despite a challenging first half, buyer expectations are high for a rebound.
Our H1 2023 Secondary Market Overview provides insights on the market trends that have shaped the asset class in the first half of this year. The report is based on proprietary data gathered from a survey sent to more than 100 of the largest and most active secondary participants globally.
The deal environment proved to be challenging in the first half of the year due to a dislocation in valuation expectations between buyers and sellers, resulting in a notable drop in transaction volumes in the first half of the year. However, continued improvement in economic conditions and public markets are expected to help narrow bid-ask spreads and give investors conviction to put dedicated dry powder to work in the coming months.
The vast majority of our survey respondents expect year-end volumes of approximately $110 billion.
Gerald Cooper
Partner & Head of North American Secondaries
“We think conditions are set for materially higher transaction volume in H2 2023, providing much-needed liquidity to LPs through LP-led and GP-led secondary transactions.”
Key findings include:
Drop in market volumes
Transaction volumes fell by 24% in H1 2023 compared to full year 2022, in response to a challenging deal environment that mirrored the overall M&A market.
LP-led sales increased on a relative basis
Pricing for more diversified exposure was attractive for buyers and persistent allocation pressures created a more acute need for LPs to trade out of illiquid assets.
GP-led volumes down materially
On balance, buyers found better relative value in LP led transactions in H1 2023, leading to a shift in buyer demand and a higher bar for GP-led deals, with volumes down by about 36% from H2 2022.
Discounts widen on LP-leds
The average pricing on LP-led transactions dipped in H1 2023 relative to FY 2022, with only 25% of transactions pricing at a 10% discount or better compared to 38% in FY 2022,
Wider dispersion of pricing on GP-leds
A lack of traditional exit opportunities in H1 2023 helped to facilitate greater flexibility on pricing for continuation fund transactions.