Where are the most attractive continuation fund opportunities?

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In the first part of our video series focused on continuation funds , otherwise known as GP-led secondaries, we highlighted the significant growth seen in this part of the market in recent years as wider exit options have narrowed – and the potential for this to continue in the future.

But a key question for investors seeking to gain exposure to this dynamic and rapidly-evolving segment, is where might they find the most attractive investment opportunities?

In the second episode in the series, Christiaan van der Kam, Head of Secondary Investments at Schroders Capital, highlights our conviction focus on continuation fund transactions in the lower mid-market. This refers to acquisitions of portfolio companies in small and mid-sized buyout funds, with enterprise values of less than $750 million.

In particular, he discusses the potential for these deals to deliver transformational growth thanks to a combination of:

• A very wide and diverse investment universe, within which deals are often marketed directly to secondary investors with whom a fund manager has an existing relationship.

• Lower entry valuations compared to transactions for large-cap buyout companies, in line with trends across the wider buyout market.

• Greater potential for growth within the underlying companies compared to larger businesses, through expansion into new product areas, sectors or geographies, and by using new growth capital to fund strategic add-on acquisitions.

• A broader array of eventual exit options, including sales to larger private equity buyout funds or strategic corporate buyers, with less reliance on IPOs.

Look out for the final part in the series, which will highlight a case study showcasing how GP-led secondaries can be used to gain exposure to compelling, growing companies.

Click here  to read more about why we see compelling continuation fund opportunities in the lower mid-market.