The secondary market has fared better than the buyout market during the coronavirus pandemic, but it has certainly not emerged unscathed. As with any sector, the pandemic has caused certain types of transactions (e.g.
, preferred equity) to rise to prominence, while others (e.g.
, GP‑led restructurings) have tapered somewhat. As sponsors have explored options to exit investments and obtain liquidity despite the choppy markets, cross-fund transactions have emerged as a potential solution provided sponsors guard against certain inherent risks and conflicts the transactions can introduce. Those topics were covered in a recent Kirkland & Ellis webinar featuring Nigel Dawn, senior managing director and head of Evercore’s private capital advisory group, as well as Kirkland & Ellis partners Nicole Washington and Alpa Patel. This first article in a two-part series outlines secondary market trends in 2020, while also providing an overview of how to successfully structure cross-fund transactions to avoid LP and SEC scrutiny. The second article
will cover various issues related to GP‑led restructurings as an option for exiting investments and creating liquidity. For additional insights from Kirkland & Ellis partners and Evercore, see our two-part series on representation and warranty insurance in the secondary market: “Financial Impact on Transactions and the Process of Obtaining Insurance
” (Feb. 11, 2020); and “Pricing, Scope of Coverage and Key Policy Exclusions
” (Feb. 18, 2020).