Mid-market banks scramble to bring on continuation fund talent

As private equity secondaries heads for what is expected to be another record year for deals, mid-market investment banks are scrambling to bring on executives with experience in continuation funds to compete in the frenetic market.

The fear is losing out on M&A mandates with sponsors because they don’t have the ability to offer the continuation fund option as part of a firm’s exit options for portfolio companies, sources told Buyouts.

“A lot of firms are thinking about it. This is a gap and there are certain companies we’re advising on that end up going to different boutiques because we don’t have this capability. So let’s hire a continuation fund guy to fix that,” an adviser said.

The talent search comes as more GPs than ever are exploring the use of continuation funds to extend their holds over assets. GP-led deals have taken the majority of deal flow recently, surpassing traditional LP portfolio sales, which have historically represented the largest slice of deal activity.

GP-led deals require a different set of skills than working with LPs on selling portfolios of fund stakes. Deals like single-asset continuation funds require the mindset of a dealmaker as well as an understanding of LP relationships, sources have told Buyouts in the past. This set of skills is not easy to find, and not something specifically taught in business school, which has led to a talent gap as deal activity continues to grow.

Those with secondaries experience are in high demand. Mid-market focused investment banks William Blair, Baird, Piper Jaffray and Solomon Partners have all been on the hunt for GP-led talent, five sources told Buyouts in recent interviews. Spokespeople for the banks did not respond to comment requests Monday.

William Blair is expected to announce the hiring of a well-known secondaries adviser soon, three sources told Buyouts. The identity of the executive could not be confirmed as of press time.

The other investment banks have reached out to potential candidates for the role, sources said. Another mid-market focused investment bank, Guggenheim Securities, announced last week it was hiring Orcun Unlu, Citi’s head of private capital advisory, to rebuild its secondaries advisory business.

“The single-asset deals are growing very rapidly and becoming a tool in everyone’s tool kit,” according to a GP who has run such deals. “It’s bringing liquidity to an illiquid market.”

Recent entrants building whole private capital groups include Jefferies, which brought on a team last year that had left Greenhill & Co to start a team at Guggenheim. Moelis & Co. last year hired ex-Evercore secondaries executive Rodney Reid to lead private funds advisory working with institutional investors and GPs on secondary deals.

Also last year, Houlihan Lokey hired former Credit Suisse secondaries executive Sameer Shamsi as its head of secondaries.

Banks are approaching secondaries advisory in two ways: either they want to “play M&A defense” to make sure they can offer the continuation fund path as part of its exit options for sponsors, or build a full private capital advisory group that includes secondaries and primary capital raising capabilities.

For some investment banks, it’s more about playing “M&A defense than about wanting to actually be in this business. They don’t want to lose the mandate. We’ll see if any of these [shops] buy a business or build a whole private markets team including secondaries, primaries, which means they actually want to compete with” the bigger secondaries advisers, the buyer said.