While the current macroeconomic environment has become more challenging, economic headwinds are not necessarily acting as an impediment to deal activity for continuation transactions. That’s especially true for GP-led deals, specifically single-asset transactions, as I mentioned. GPs’ reluctance to divest prized blue-chip assets at a time when comparable businesses remain in a trough make continuation funds particularly attractive, as they are set up to acquire assets from private equity funds nearing the end of their lifespans, and allow GPs to hold on to their best-performing assets. We continue to see high-performing, low-leverage and resilient PE-owned businesses that, in our view, have the potential to outperform and capitalize on opportunities, even in a down cycle. For example, buy-and-build businesses such as retail chains or health service providers with sufficient capital can act as consolidators; they purchase attractively priced add-on businesses to capture synergies, while bringing down average acquisition costs.
We’re seeing the impact of this opportunity. Deal volume in the GP-led secondary market reached $68 billion globally in 2021, about half of the overall secondaries market, and an almost 100% increase from the year prior. 3 About 44% of GP-led secondaries were invested in single-asset continuation funds in 2021, as investors gravitated toward highly concentrated exposure to managers and portfolio companies they know and see as top performers.