Hope your week went well. Just a reminder to get your Deal of the Year submissions in by end of day Monday, Feb. 10. Go here to read the rules. And send your submissions to me here.
Media deal: Here’s a big deal in my world — Welsh Carson Anderson & Stowe-backed Green Street Advisors agreed to buy four trade publications from Harrison Scott Publications: Real Estate Alert, Commercial Mortgage Alert, Hedge Fund Alert and Asset-Backed Alert. Check it out here.
Big: TPG is no stranger to the secondary market. Last year the firm ran a tender offer process to allow LPs to cash out of its $2 billion second growth fund.
Now we have news that the firm is exploring a single-asset secondary process for its portfolio company Creative Artists Agency. TPG first invested in Hollywood talent powerhouse CAA in 2010, and then expanded its holding to a majority stake in 2014.
TPG is working with Park Hill on the process, sources told me. Check out my story here for the details.
Single-asset deals are a new, and growing phenomenon in the secondary market. Such processes allow a GP to move a single company out of an older fund into a special purpose vehicle colloquially known as a continuation fund.
Limited partners in the older fund get the option to cash out of their exposure to the asset, or roll their interest into the new pool. Continuation funds generally come with a finite term of around three to five years — giving the GP more time to manage the asset.
Traditionally, secondary buyers would not be willing to stake so much on one asset, not wanting a single investment to represent too much of one fund. But two things have eased that risk to some extent: growing fund sizes and buyers’ ability to syndicate larger deals into the market, spreading exposure across larger investor groups.
Single-asset deals more than doubled in volume between 2018 and 2019, accounting for 20 percent of the $26 billion of GP-led deal volume last year, according to Evercore’s full-year 2019 volume report.
Such deals get mixed reviews in the market. Secondaries buyers seem split on whether they like these types of transactions and the risk they represent. “A good portion of the secondary market is not set up to engage in these types of deals,” one secondary buyer told me. “It’s hard for their LPs to understand why they would migrate to do these deals.”
Pricing: Last year, secondary deal volume fell in the second half of the year as buyers spent a lot of money in the first half and backed off from new deals. This easing of demand seems to have led to a slight softening in pricing as well.
Greenhill Cogent’s full-year 2019 volume report shows the average high bid for all funds in 2019 was 88 percent of net asset value — a 400 basis point drop from 2018. This decline occurred despite a strong year in the public markets, which is unusual in that secondary pricing generally tracks public markets.
Big one over on PE Hub today from Sarah Pringle, who writes that Thoma Bravo is evaluating the sale of Imprivata, which helps healthcare providers protect patient information. A formal process has not been launched but is expected to get underway in the next few weeks, Sarah writes. Read our exclusive coverage here.
California State Teachers’ Retirement System plans to increase its private equity allocation by about 3.6 percent, writes Justin Mitchell on Buyouts. Read it here on Buyouts.
Have a great weekend! Hit me up with that good tips n’ feedback at email@example.com, on Twitter or find me on LinkedIn.