Secondary Transactions Resource Center

Secondary Transactions Resource Center

With the volume of GP-led secondary and continuation fund transactions expected to increase, GPs should carefully consider the underlying process for determining the value at which these deals transact. Consistent third-party valuations and an independent fairness opinion can help protect GPs from those seeking to challenge a transaction in hindsight.

The Rise of Continuation Funds and Secondary Transactions

Continuation funds have joined IPOs and sales to a strategic acquirer or another PE sponsor as an acceptable and viable exit alternative for portfolio companies. They can play an important role in addressing scenarios in which the general partner (GP) of a private equity fund wishes to maintain the fund’s investment in a particular portfolio company (or companies) while providing liquidity to limited partners who desire it. As such, the volume and value of GP-led continuation fund transactions will likely continue to increase going forward.

Independent Third-Party Valuation Best Practices

At the heart of the continuation vehicle transaction is an inherent conflict of interest, as both the selling fund and buying fund are entities controlled by the same GP.

As such, when executing a continuation fund transaction, GPs should carefully consider the process underlying the determination of the value at which the company will transact. Consistent third-party valuations, and potentially an independent fairness opinion, can help bolster the record and protect the GP from those who may wish to challenge the transaction in hindsight.

The SEC Weighs In

The SEC recently voted to adopt new rules and amendments under the Investment Adviser Act of 1940 to enhance the regulation of private fund advisers, including in connection with an adviser-led secondary transactions. The new rule requires that the advisor obtain a fairness opinion or a valuation opinion from an independent opinion provider in any such transaction. Interestingly, while fairness opinions have long been considered a best practice in transactions with the appearance of conflicts of interest, the new rule appears to be the first time that the SEC has specifically required a fairness opinion or a valuation opinion.

Select transactions

Lodestar Has Been Acquired by Gordon

Lifepoint Health

Altus Health Has Consolidated


Fairness Opinions Resources

SEC Requires Fairness or Valuation Opinion in GP-Led Secondary Transactions

SEC Requires Fairness or Valuation Opinion in GP-Led Secondary Transactions

The SEC voted to adopt new rules and amendments under the Investment Adviser Act of 1940 to enhance the regulation of private fund advisers.

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Continuation Vehicles: Valuation and Fairness Considerations

Continuation Vehicles: Valuation and Fairness Considerations

A rise in secondary transactions led by general partners brings with it a tide of valuation considerations.

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A Look at SEC’s Proposed Rules on Adviser-Led Secondary Transactions

A Look at SEC’s Proposed Rules on Adviser-Led Secondary Transactions

Stout takes a deeper dive in the United States Securities and Exchange Commission (SEC) proposed new rules under the Investment Advisers Act of 1940.

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Fairness Opinions: A Guide for Selecting a Provider

Fairness Opinions: A Guide for Selecting a Provider

This guide provides boards of directors, special committees, and other fiduciaries with valuable information and insights to consider when selecting a fairness opinion provider.

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Stout is consistently recognized as one of the top fairness opinion providers over the last decade.

Stout Video

Learn more about Stout’s leading Transaction Opinions practice, which ranked #1 in the United States and #3 globally in 2023 in LSEG’s Global M&A Financial Advisory Review (formerly known as Refinitiv’s Global Mergers & Acquisitions Review).