Two Q’s, Two A’s On One of the Biggest Secondary Deals This Year
In a deal that defies the stilted secondary market, Merrill Lynch yesterday sold €150 million worth of shares in Kreos Capital, a European venture debt fund manager. The buy-side group included Paul Capital, AIG PineStar Capital, HarbourVest Partners, Access Capital Partners and SVB Financial Group. Alongside the spinout of Lehman Brothers’ venture arm (advised by Harbourvest Partners), it is one of the largest secondary transactions to close this year. I spoke with the deal’s sell-side advisor, David Waxman of Azla Advisors, on where the deal stands in the greater secondary market. How does this deal fit in with the general market activity? The gap between buyers and sellers is wide because it’s so tough to value equity at this stage. … There’s a feeling in the secondary community that NAVs don’t yet reflect the full value of the writedowns, and so it’s difficult for them to offer much for the LP interests. There’s even a debate over whether secondary investors should stay away from ’06-’07 vintage private equity funds altogether. In this deal, we started working with Merrill Lynch two years ago. Merrill planned to be the sole sponsor of Kreos for two years and then divest 75% of holding on secondary market.
