Ardian, Lexington emerge as buyers of $1bn-plus LP portfolio from CPPIB

Ardian and Lexington Partners are set to buy a $1 billion-plus portfolio of fund stakes being sold by Canada Pension Plan Investment Board in a deal that was agreed before the pandemic-induced market downturn.

It’s not clear if the CPPIB deal has closed yet. It’s possible the buyers are attempting to renegotiate the price on the deal since the market dislocation, which would be a routine move by buyers not locked into a deal, sources told Buyouts.

The deal also involves some level of debt, they said.

Ardian and Lexington declined to comment. CPPIB did not return a comment request Monday.

Sales of LP portfolios, like any other sort of secondary transaction, are on pause for the moment as the market roils in the coronavirus-induced pandemic.

Deals in general are on pause because the pricing gap between buyers and sellers has widened considerably. Buyers have told Buyouts in recent interviews that transparency on pricing is extraordinarily challenging right now.

LP books are especially tough to value because they involve numerous funds holding a broad, diverse set of underlying assets. Several large LP portfolio sales that were being shopped on the market are paused as buyers and sellers wait to get a sense of the market bottom, sources said.

“What’s being heavily discussed in investment committees right now, for deals in discussion or about to close, is how to re-underwrite those, how do you re-trade those?” an advisor said about secondaries buyers.

“A lot of people say they’re open for business but the reality is people are looking for no-brainer deals now that are easy to explain to the investment committee,” the advisor said.

A few one-off sales are still happening, generally fund stakes carved out of larger portfolios, a separate secondaries advisor said. Even if the full portfolio transaction is paused, a few small trades are happening on the fringes, the advisor said.

Total transaction volume as of now is heading for a down season compared to the record-setting activity of the past few years. Estimated total deal volume came in around $86 billion in 2019, according to fresh research from UBS.