European Secondaries are Rapidly Evolving

The European secondaries landscape mirrors its US counterpart in structure but diverges sharply in size, fragmentation, and the mechanics that govern how continuation vehicles get done, according to Sebastien Burdel, a Partner in Ares Secondaries Group and Oliver Altendorf, a Director at Piper Sandler. 

In a fascinating conversation with Liquid Courage's Joncarlo Mark (Upwelling Capital) and David Snow, Burdel and Altendorf paint the picture of a market in transition — thirty percent of European secondary volume is expected to come from CVs this year — while flagging structural friction points unique to Europe, from the fund-level waterfall to multi-jurisdiction tax complexity, that can derail deals that would close cleanly in the US. 

The episode also breaks new ground on private credit CVs, where a wave of 2019-vintage funds sitting at 0.6X DPI is quietly creating a new and fast-growing corner of the secondaries market on both sides of the Atlantic.

Key Takeaways

• CV and M&A markets in Europe are starting to 'blur' - the line between a traditional M&A exit and a continuation vehicle is increasingly porous in Europe, with Oliver Altendorf noting that assets now routinely switch channels mid-process — and in at least one recent case, the CV market actually cleared at a higher valuation than the M&A process, a near-unprecedented outcome that points to how competitive the buy side has become.

• European waterfalls can 'twist the reason' for a CV - unlike the US deal-by-deal carry structure, the European fund-level waterfall creates a specific danger zone — a GP hovering just below their hurdle rate whose primary motivation for a CV is to de-risk their carry rather than unlock value for investors, leaving them, as Sebastien Burdel puts it, "neither a good seller nor a good buyer" of the asset.

• Valuation disappointments lead GPs to the CV market - a recurring pattern Burdel flags is the GP who runs a full sale process, fails to attract a bid at their expected price, and then pivots to the secondary market as a last resort — a dynamic that has grown more visible as CVs now represent nearly twenty percent of all private equity exits, drawing in assets and managers with no legitimate place in that market.

• The 'ideal candidate' for a CV is a successful company - contrary to the perception that CVs exist to manage problem assets, Burdel describes the archetypal European CV as a company held three to four years at a three-to-four-times return, where the GP simply believes it would be leaving money on the table to sell now — and the CV structure allows existing LPs to take liquidity while new capital funds the next leg of growth, whether organic, through M&A, or via geographic expansion into new European markets or the US.

Access the full transcript and a searchable library of secondaries content at the Liquid Courage Substack.

#privateequity #liquidity #secondary #europe