Triago: Secondaries deal volume to spike this year

The Paris-based placement agent and secondaries advisor is forecasting between $15bn and $18bn in secondaries deal volume this year, a major leap from the about $8bn of deals done last year.

Deal volume in the secondaries market will more than double this year compared to last, peaking between $15 billion and $18 billion, according to placement agent and secondaries advisor Triago.

That level of deal volume would eclipse prior years, including 2008, in which deal volume reached a historic high of $15 billion. Deal volume last year reached about $8 billion.

“There’s a huge overhang of capital right now waiting to be invested in secondaries, but there wasn’t that much for sale last year,” says Jean-Marc Cuvilly, a partner with Triago who heads the firm’s secondaries activities in North America. “We’re estimating a $40 billion overhang waiting to be deployed in secondaries.”

An anticipated flood of secondaries deals never came about last year, as the markets remained closed for the first half of 2009 and opened up slightly toward the end of the year.

Sellers on the market were not as pressured as anticipated because, in the absence of general deal flow, GPs were not making capital calls. The market had some distressed sellers in the early months of 2009, but by mid-year, LPs had the luxury of waiting for the right price on their assets.

The bid-ask spread between buyers’ and sellers’ expectations remained wide, which also accounted for the lack of closed deals last year, Cuvilly said.

“The pricing is getting much better as a result of supply and demand imbalance in the secondaries market,” he said.

Secondaries firms that raised huge amounts of money in the past two years are feeling pressure from their investors to put the money to work, according to Cuvilly. “There’s a bit of frustration now [among LPs] in how quickly capital is getting put to work. And if you’re paying high management fees and seeing nothing getting called, that becomes an issue,” he said. “You can’t just sit on a bucket of capital and not be calling anything, or doing any deals.”