A number of current deals suggest that secondary buyouts – involving the sale of portfolio companies by one financial sponsor to another – are once more becoming de rigueur.
November saw BC Partners agree to the $500 million acquisition of US education group ATI Enterprises from a consortium of GPs including The Riverside Company and Primus Capital; The Carlyle Group agree to acquire TA Associates' software developer OpenLink Financial; and Hellman & Friedman partner with co-investor JMI Equity to buy another software developer, Datatel, from a consortium of four private equity firms. Permira, meanwhile, is reportedly in talks with Montagu Private Equity to buy Survitec, a manufacturer of survival equipment.
Secondary buyouts – labelled “pass-the-parcel” by Terra Firma boss Guy Hands in early 2009 – were commonplace during the credit boom years. David Walker, a partner at law firm Clifford Chance, says they may be making a return now, as the “clean” targets offered by such transactions represent attractive opportunities in today's market in which quality assets are still in short supply.