The private equity(PE) secondary market has been growing rapidly in recent years. As a major participant, park hill investments and services around secondary funds(S funds) transactions are gaining more attention. This article will focus on park hill, a leading secondary market advisor, to analyze its key services, fee structure and positioning. With rich cases and data support, it provides insights into fees and economics behind complex secondary deals, as well as the landscape of secondary advisory industry.
Overview of Park Hill and its Services Around S Funds Transactions
Founded in 2004, Park Hill provides fund placement and secondary advisory services for alternative asset managers. It has completed over $550 billion of private capital placements. As one of the earliest secondary advisors, its secondary transaction value exceeded $65 billion. Key services around S funds transactions include:
– Help clients navigate secondary sale processes, from preparing marketing materials, identifying potential buyers, negotiating with prospective purchasers, to closing transactions.
– Provide advisory on acquisition of secondary LP interests, investment portfolios and commitments. Conduct comprehensive due diligence to value assets for clients.
– Offer flexible transaction structuring expertise, customize solutions to meet client objectives. Structures include portfolio sales, fund restructurings, stapled secondary transactions.
– Leverage insights from robust secondary deal experience and market intelligence to guide clients on optimal timing and pricing.
– Draw on deep buyer relationships and run tailored auction processes to maximize value for clients.
So by advising both buyers and sellers, Park Hill developed valuable perspectives into economic drivers behind secondary market.
Fee Structure and Economics Behind Complex Secondary Market Deals
As a leading secondary advisor, Park Hill provides placement and secondary advisory services on a success-based fee model. Specifically for secondary deals, the typical fees range from 3% to 5% of transaction value depending on size and complexity. Smaller or more complex deals tend to command higher percentages.
Besides straight percentage fees, Park Hill also charges expenses related to the deal, including external legal costs, travel expenses and more. It’s common for clients to pay a retainer upfront, which will be credited back at closing.
For instance, Park Hill advised Lexington Capital’s sale of interest in 19 funds to Goldman Sachs Asset Management, with a reported price tag of $1.6 billion. This mega secondary transaction was estimated to generate around $50 million in fees for Park Hill.
While buyers and sellers split economics in secondary deals, relative bargaining power decides who pays advisor fees. In Lexington’s case, as a highly sought-after seller of high quality assets, it probably had Park Hill’s fees covered by GSAM on closing.
So despite seeming repetitive work of matching buyers and sellers, top players in the advisory space do capture reasonable economics due to the high-touch nature of deals. Expertise on complex deal structures and large buyer network built over time leads to differentiation.
Landscape of Secondary Advisory Industry
The secondary advisory industry features a mix of players – large investment banks like Citi, Evercore and specialist advisory firms like Campbell Lutyens, Eaton Partners also compete for mandates.
Bulge bracket banks can leverage broader client relationships and cross-sell across units. But they tend to focus on larger transactions due to higher cost structure. Specialists boast deep expertise in secondary market and the PE ecosystem, allowing them to pursue more niche deals.
In particular, Park Hill possesses unique DNA being backed by PJT Partners, the most active advisor for M&A and restructurings involving alternative asset managers. This enables unparalleled access to proprietary deal flows.
Going forward, as LPs increasingly incorporate secondary investments into portfolio strategy, demand for external expertise is set to grow. Top secondary advisors who can navigate the intrinsic complexities of secondary market will continue leading the field.
As a pioneering player in the secondary advisory sector, Park Hill leverages robust expertise and an extensive buyer network to advise secondary transactions and fund restructurings. By examining its fee structure and industry landscape, we gained valuable insights into the economics behind complex secondary market deals.