Private Market Secondaries - July 2024 market data points

Record Private Equity Dry Powder and Rising Secondary Market Activity Signal Growth Ahead

Private equity dry powder hit a record $2.62 trillion by July 2024 , driven by accelerated accumulation in the year's first half, according to S&P Global Market Intelligence and Preqin. Funds added $49.44 billion to their reserves in six months, exceeding the previous 12-month total. The 25 largest private equity and venture capital firms hold over 21% of this amount, with KKR & Co. Inc. leading at $43.86 billion.

Secondary sales are anticipated to be a major source of deal flow, as private equity firms are pressured to monetize aging investments. Bain & Co. estimates that half of the approximately 28,000 global buyout fund portfolio companies have been held for four years or more, nearing the end of typical investment periods.

Moreover, Investec’s latest Secondaries Report forecasts substantial growth in the secondaries market over the next year due to liquidity constraints in private equity. The report finds that 98% of managers expect their next fund to be larger, with 80% predicting increased deal flow. GP-led continuation funds are identified as a key growth area, with 75% of managers planning more activity in these deals.?

The report also notes that managers are diversifying into asset classes beyond traditional buyouts, such as real estate, growth/venture, and private credit. Additionally, 90% of managers expect increased investments from high-net-worth individuals.?

While single-asset funds will remain prevalent in GP-led deals, multi-asset funds are anticipated to gain traction. Investec highlights the secondaries market as a crucial alternative for liquidity amid difficulties in exiting assets at favorable valuations. The report is based on a survey of 50 global secondaries managers conducted in early 2024.

Recent Developments and Deals

• GCM Grosvenor is set to launch a dedicated private debt secondaries fund, the GCM Grosvenor Credit Secondaries Fund , recently registered with the US SEC, although its target size and launch date are not yet revealed. The firm has strengthened its credit team with the addition of Brandon Cahill from Blue Mountain Capital and Scott Ingles from Carlyle Group. GCM recently co-led funding for Guggenheim Investments' $1.2 billion private credit vehicle and launched the $1.25 billion GCM Grosvenor Secondary Opportunities Fund IV, focused on private equity. The private debt secondaries market is expanding, with large asset managers showing increased interest and expected transactions exceeding $30 billion this year.

• NewView Capital, led by former New Enterprise Associates GP Ravi Viswanathan, is seeking $700 million for two venture industry secondaries funds . The Burlingame, California-based firm set a $400 million target for NewView Capital Fund III, slightly higher than the amount in Form D documents filed in late 2022. As of January, NVC III had raised $191 million. Additionally, the firm is targeting $300 million for NewView Capital Special Opportunities Fund II, according to Form Ds filed last December.

• North Sky Capital has finalized its latest impact secondaries fund, Clean Growth VI (CG VI) , securing $250 million in capital commitments from a diverse range of investors, including pension plans, foundations, wealth management platforms, and family offices from the US, Canada, Brazil, Singapore, and the UK/Europe. The fund aims to deliver robust private equity returns while generating positive environmental and social impacts, with a focus on energy transition, climate tech, the circular economy, and healthy living sectors. CG VI is designated as an Article 8 fund under Europe’s SFDR framework.

• Design software startup Figma has finalized a tender offer, valuing the company at $12.5 billion after terminating a $20 billion merger agreement with Adobe due to regulatory issues. New investors in the tender offer include Atlassian, Fidelity, Franklin Venture Partners, and Iconiq Growth, alongside existing backers like Sequoia, Greenoaks, Thrive Capital, Durable, Andreessen Horowitz, and Kleiner Perkins. Coatue Management, Alkeon Capital Management, and General Catalyst Partners also joined in. Figma's annual recurring revenue exceeds $700 million and is expected to surpass $1 billion next year. This valuation represents a 37.5% drop from the Adobe deal but a 25% increase from its 2021 valuation.

• Due to Stripe’s ongoing IPO delay, major investor Sequoia Capital is offering up to $861 million in Stripe shares to LPs from earlier funds. This move addresses LPs' need for liquidity amid a stagnant IPO market and showcases Sequoia’s confidence in Stripe’s future prospects. Although Stripe’s valuation dropped from $95 billion to $50 billion in 2023, it recently climbed to $65 billion through a tender offer. With $517 million invested and a $9.8 billion valuation, Sequoia's actions suggest that Stripe is not planning an IPO in the near future despite its continued growth.

• Goldman Sachs is heading a $540 million continuation vehicle for NEA , involving stakes in 11 companies like Databricks and Plaid. This deal offers liquidity to NEA’s limited partners and includes investors such as Industry Ventures and Pathway Capital Management, with the transaction done at a 19% discount to NEA’s valuations. This move highlights the growing pressure on asset managers to return cash due to a slowdown in exit opportunities.

• Venture capital firm Lightbox is exploring a $100 million continuation fund to back mature companies such as Rebel Foods and Zeno Health. This initiative aligns with a rising trend in India, where firms like Chrys Capital and Samara Capital have established similar funds. Continuation funds enable investment firms to provide liquidity to limited partners while continuing to invest in high-performing assets that require more time to fully mature.?
• Dharana Capital has acquired $50 million worth of shares in Urban Company , representing the largest liquidity event for employee stock options in the company's history. Dharana Capital, known for its investments in technology and consumer sectors, will join Urban Company's board. The company, last valued at $2.1 billion in 2021, has not secured new funding since then but recently reported strong revenue and its first profit. Urban Company is planning an IPO for next year after postponing its 2023 listing. Established in 2014, Urban Company operates in over 50 cities in India and several international markets, including the UAE.

If you’d like to discuss any secondaries opportunities, or private market activity across private Credit, VC, or PE, you can reach me at [email protected] .

You can learn more about Axis Group Ventures at our website here .?

All the best - Tim