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In the US, there's a pretty strong case against going public due to regulation (sarbox, reg FD, etc.), increasingly expensive (due to liability mitigation) BOD members, IR + PR costs, feedback from non-investing populists, and the concern over 'will regulators find a reason to make more public market regulations'.

Personally, from an asset management perspective, I'd typically rather own a stake in 'XYZ Co.' with a PE BOD and PE costs than 'XYZ Co.' with a public co. BOD and public co. costs.

I think all this drives PE funds to be a larger percentage of equity capital going forward and makes a strong argument for secondary buyouts. I think you can make an argument for many businesses being basically permanently managed by PE firms, with a sales transaction occurring every 5 years or so.

Tangentially however, if, say in 10 years, Carlyle, Blackstone, etc. become ~$500 billion funds, secondary buyouts become standard practice, and public markets become ghost towns of the financial world, will regulators start coming up with reasons for increased oversight of PE firms?


Agree with your comment deldallas.

In some European markets the regulators and unions are already raising this issue and arguing that very large private equity funds/portfolio companies represent "too big to fail risk" and should therefore be monitored and regulated like public cos.


Intuitively, secondary buyouts represent failure. Firstly, PE buyers never want to be the highest bidder in an auction; they want to close opportunistic deals at lower than market to effect multiple arbitrage on exit. Secondly, a PE buyer is rarely the natural buyer of a firm, unless they're making an acquisition that represents synergies. Trade buyers should be able to pay more. Of course there are caveats to all of these points, but in my mind, secondary buyouts just show how PE is grasping at straws at the moment.

It's this simple, PE prides itself on entering and exiting at great prices. Well how can one PE firm enter at a great price and the other PE firm exit at a great price on the same transaction???

Of course, like the first commenter said, at the very big end of town, there's not much choice but to do secondaries since the pool is limited. By I stand by my comment that in the mid-market, secondaries don't make sense.


Hmm there seems to be no mention of the likes of Fortress or ICG etc. on this website.

Are these funds not considered active?

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