In a new publication entitled “Getting the Price Right in GP-Led Secondaries: A look at the Nord Anglia deal through the privateMetrics® lens”, Scientific Infra & Private Assets (SIPA) highlights the fact that the tremendous growth in continuation vehicles and cross-fund transactions has altered the alignment of interest between limited partners (LPs) and general partners (GPs).

With GPs now both a seller and a buyer of the same asset across vehicles, safeguards need to be in place to ensure fairness to all parties. LPs can no longer assume that the GP is perfectly aligned on valuation and pursuit of maximum sale proceeds. LPs need to have an opinion on exit pricing, specifically forming their own view on exit multiples and valuation, and be able to act swiftly, as there is often only a short window to decide if they will roll their holding or exit. This is a fiduciary concern.

LPs have relied on GPs to source, manage, and exit investments on their behalf, protected by a fund structure and limited partnership agreement that aligns interests. The rise of GP-led deals necessitates more involvement from LPs to ensure beneficiary assets are treated fairly.