Cipio Europe single direct secondaries

Longer holding periods have created ‘a pent-up demand’ for liquidity, Cipio says.

The European market in single asset direct secondaries is now worth €1 billion per annum, according to Cipio Partners, a European direct secondaries specialist.

The firm arrived at this total by taking the 60 direct secondaries deals recorded in both 2012 and 2013, which averaged more than €600 million per year in total value, and estimating a further €400 million per year of unreported deals based on its own “confidential private information”.

Cipio said two trends were behind the development of such a sizeable market for buying and selling investments in single companies, as opposed to the portfolios of assets more often associated with direct secondaries transactions.

First, portfolio company holding periods have increased from an average of three to seven years over the last 10 years. “The misalignment of venture capital funds and corporate investment programmes' investment horizons with this business reality has created a pent-up demand for liquidity,” the firm said.

It added: “The second change is that today there are more mature technology businesses in Europe that already have revenues of €10-100 million or above, yet are still intent on growing further before selling. Minority positions in these more mature technology businesses are being actively traded.”

Most single asset direct secondaries deals averaged below €15 million, Cipio found. Geographically, 85 percent of the transactions involved companies located in France, Germany, Scandinavia and the UK; the typical target company was 11 years old on average and employed fewer than 200 people. Software and internet businesses accounted for around 50 percent of the volume traded.

Cipio, which is led by a seven-strong management team including managing partner Roland Dennert (pictured), closed its Fund VI in January 2011 on €137 million, according to Private Equity International's Research & Analytics division. The firm has approximately €300 million in assets under management.