It's hard to think of another private equity phenomenon that attracts as much bad press ? as well as limited partner criticism ? as secondary buyouts. How many times have you come across commentary claiming that general partners engaged in the practice were ?passing the parcel?? And that secondary buyers would inevitably be ?left holding the baby? as soon as ?the music stops??

At the very least, it's time for some new metaphors. Better still would be a more sophisticated analysis of what sponsor-tosponsor transactions are really all about. For a start, it should be acknowledged that transactions have a context in which they take place, and that it is this specific context that determines whether a buyout, secondary or otherwise, is a winner or not.

This analysis must start from the obvious point that private equity funds have different life cycles and areas of expertise. These two variables determine how long they hold an investment and what they do to it until the time comes to exit. What the critics refuse to acknowledge is that even though one fund's strategy has succeeded, another may well take the business through another growth phase. (Simmons, the US mattress maker, is currently attempting this for the fifth time.)

So secondary purchases can be a good thing. When Standard Life Investments (Private Equity), led by the highly regarded Jonny Maxwell and David Currie, closed its latest European buyout funds of funds this January, the group said it felt good about the future not least because sponsor-to-sponsor transactions looked set to continue.

This month we are leading on leveraged finance: the key ingredient as deal size increases and one that can turn an offer into an acceptance. We talked to some of the key lenders in Europe to get their take on the leverage market at present and found a group both tantalised and taxed by the opportunities available ? secondary purchases included.

Philip Borel

Managing Editor