Global private secondary market transaction volume hit an all-time high of US$160 billion in financial year (FY)-2024, which is up 41 percent from 2023 and has surpassed projections.1 Private market secondaries have been gaining momentum due to the rapid innovation of products and structures. Secondaries are also adapting to market forces and the rise in global uncertainty.
In this look at how private equity (PE) secondaries are entering a dynamic phase of growth and innovation, we examine:
- What trends are driving deals and why they matter
- Legal considerations in secondary transactions
- The market outlook in 2025 and key takeaways
What's Driving Deals in 2024-2025
Challenging macroeconomic conditions have led to delayed exits, more expensive debt and a growing demand for general liquidity from both general partners (GPs) and limited partners (LPs). At the same time, the stockpile of aging dry powder in private markets has grown, indicating that there is a need for reasonably priced, attractive targets. In the table below, we highlight key trends in the secondaries market:
|
Trend |
FY-2024 Data Points |
Why It Matters |
|
GP-Led Continuation Vehicles |
|
|
|
LP-Led Transactions |
|
|
|
Retail "Evergreen" Funds and 40-Act Funds |
|
|
|
Credit and Infrastructure Secondaries |
|
|
|
Venture Capital (VC) Secondaries |
|
|
Legal Considerations
1. Due Diligence and Negotiation
Generally, there is increased transparency around the underlying
portfolios in secondary transactions when compared to traditional
buyout funds; however, due diligence may still be required as part
of the negotiation process to customize deal terms or for
independent valuations. Customization of deal terms appears to be
more prevalent in single-asset transactions and for investors with
sufficient capital and capabilities to position themselves as lead
investors.
Parties will also want to be mindful of the potential conflicts of
interest among GPs, rolling LPs, selling LPs and new investors.
Particularly in GP-led continuation vehicles, sponsors and GPs will
need to be mindful that they are selling trophy assets to
themselves and of the heightened need for assets to be priced
fairly.
2. Documentation and Regulation
Typical legal documents that may need to be prepared include a purchase and sale agreement, subscription documents, a limited partnership agreement or trust indenture, joinders, side letters and legal opinions. Pursuant to the Securities Exchange and Commission (SEC) Private Fund Advisor Rule (US), private fund managers managing funds in the US would have also been required to obtain an independent fairness opinion prior to any GP-led secondary transaction; however, the rules were struck down by the US Court of Appeals for the Fifth Circuit (Bennett Jones wrote on this development here). Even so, it has highlighted the increasing regulatory interest in the private funds industry and certain LPs may still expect that standard.
Market Outlook In 2025
New tariffs, evolving geopolitical relations, uncertainty around
interest rates and volatile public markets have all contributed to
increasing macroeconomic uncertainty in Q1 2025. Despite this,
general consensus and Q1 2025 reports suggest that secondaries
transaction volume remains high and is expected to increase in
2025.10
We may see an increase in due diligence and tailored deal terms as
investors seek better returns despite the macroeconomic
uncertainty, leading to longer transaction timelines. Volatility in
public markets may also lead to valuation challenges since PE
secondaries are priced based on a percentage of the reported NAV,
which is typically reported quarterly. Demand for resilient asset
classes, such as private credit and infrastructure secondaries, as
well as tariff-resilient portfolio companies, is expected to
continue.
Key Takeaways
- The momentum in secondaries should continue: Both GP-led and LP-led secondary transaction volume is expected to rise in 2025, with a projected aggregate volume of US$185 billion, according to Jefferies. The downturn in PE deals and exits should continue to drive this momentum.
- The benefits of the secondary market are sought–after: Private market secondaries and secondaries funds can provide benefits to LPs, GPs and retail investors alike including, early liquidity, reduction of risk and access to mature, high-performing assets, setting the stage for increasing demand.
- Due diligence: Before closing on a secondaries transaction, parties will want to consider various legal matters including conflicts of interest, due diligence and negotiation of key documents.
- Look for new secondaries growth in other areas: New PitchBook research show that the market for venture capital direct secondary transactions in the US is swelling. Reuters recently reported that private credit secondary sales are set to rise as market turmoil spurs the hunt for cash.
Footnotes
1 FY 2024 Secondary Market Review, February 2025 [Internet], Evercore Private Capital Advisory (Evercore).
2 Evercore.
3 Evercore.
4 Evercore.
5 Global Secondary Market Review, January 2025, [Internet], Jefferies.
6 Jefferies.
7 Evercore.
8 Jefferies.
9 Q1 2025 US VC Secondary Market Watch, May 2025, [Internet], PitchBook.
10 Q1 2025 Secondary Market Insight, April 2025, [Internet], PJT Partners.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
