We’ve discussed secondaries quite a bit this year, including how the massive increases in supply and demand have not been matched by transaction volume. The most common explanation has been a wide chasm in bid/ask prices, with buyers and sellers each blaming each other for being too greedy/stingy.
Is this stalemate permanent? Not according to John Begg, a managing director with HarbourVest Partner. During a panel discussion in Quebec City, he said that for all the talk of seller liquidity troubles, the squeeze was loosened because general partners weren’t making many capital calls (particularly big GPs like mega-buyout funds). Now that deal volume is slowly beginning to pick up, Begg said he expects LPs to begin feeling more pressure to sell.
Makes sense to me, although Begg obviously comes to it from a buy-side perspective. Someone on the sell-side recently told me that institutional buyers will soon regret insisting on such deep discounts over the past year, because one-off buyers have occasionally swooped in and won deals that will produce strong returns.
(Relevant note: This is all a matter of perspective, since Erin wrote something quite different yesterday).
(Irrelevant note: Begg is originally from Buffalo, but has a French accent. Not something you hear – literally – everyday…).