Capital raised from GP-stake deals can be used to achieve a variety of strategic objectives, ranging from financing succession and GP fund commitments to recruitment and new strategy launches.
The survey shows the rationales for GP-stake deals varying by region.
Of those planning to make a GP-stake divestiture in the next 24 months, 59% of the EMEA-based respondents say working capital and talent retention are primary motivations.
Meanwhile, those based in North America are more likely to cite founder/stakeholder liquidity (50%) and/or the facilitation of succession planning (47%) as drivers.
“There is a generational change in PE. Founders are aging, and firms require a liquidity solution to realize the equity these founders hold in their firms in order to facilitate succession,” Comis says. “With the U.S. being the most mature market and, thus, ahead of the curve,” Bolsinger adds.
A UK-based dealmaker adds: “We are planning a GP-stake divestiture to improve succession planning. Firms need to have the right leaders in place.”
APAC-based respondents more commonly say their motivations for GP-stake divestitures in the next 24 months will be securing access to strategic advisory services or fueling growth, with each option selected by 50%. The data bears out these value-creation expectations, with research by academics at Cornell University and the University of Florida showing that among firms that have completed stake sales, AUM increased by 84% in the first 10 years after transactions took place. GP-stakes investors often also have primary investment programs within their organizations and can also help dealmaker-led firms to manage the transition from smaller, partner-led organizations into large asset managers operating at scale.
Most GPs, however, want to retain control of the franchises and only sell down minority stakes. Among those planning to make a GP-stake divestiture in the next 24 months, 59% are considering a divestiture of under 25%.