(updated with correction)
Industry insiders can't agree on what is driving the spate of mergers and acquisitions of private equity firms that invest on the secondary markets.
They say it's not clear whether the number of recent M&A deals reflects industry consolidation or a change of partners among secondary firms. What's more, many of the firms that were sold also offered funds of funds, a sector some say is in the midst of a consolidation.
Whether consolidation is happening or not, several factors — including a tough fundraising season, uncertain return expectations and a drop in transaction flow — are providing fodder for other alternative investment managers to gain market share and add new strategies.
Firms sold in the last two years include Parish CapitalAdvisors LLP, Greenpark Capital Ltd., Strategic PartnersInc., Cuyahoga Capital Partners LLC and AlpInvest Partners BV as well as Citigroup Inc.'s private equity business and Credit Suisse Group AG's secondary markets business.
Also during the period, AXA Private Equity became Ardian, as the fund-of-funds and secondary-market unit completed its spinout from insurance company AXA Group. AXA retained a 23% stake and agreed to commit €4.8 billion to new Ardian funds over the next five years. European institutions and French family offices own 31% and company management and employees hold remaining 46% stake, according to a September firm announcement.
“Many funds-of-funds and secondary firms have hit the wall,” said Mark Maruszewski, a partner in the New York office of private equity consulting and investment management firm StepStone Group LP. “These firms have struggled to raise capital, have been hit with regulatory changes, or do not have succession planning in place.”
StepStone has contributed to the trend. The firm is in the process of acquiring Greenpark and acquired Parish Capital in 2011.
Mr. Maruszewski's former firm, SilverBrook Private Equity, a private equity secondary fund and advisory firm, was acquired by StepStone in 2010.