Private equity (PE) may be going through a rough patch, but there are still areas of excitement. PE firms generally make money by purchasing a private company and selling it on or floating it on public markets in an initial public offering (IPO), then pocketing a percentage of the profits as ‘carried interest’. The value of these ‘exits,’ as they’re known, is the lowest that it has been in at least four years according to S&P Global; not many companies are being sold at a better price than they were bought for, and successful IPOs are few and far between. Fortunately, there’s an alternative: secondaries. And junior banking jobs that work with secondaries are booming.
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Secondaries refer to any transactions in which stakes in the funds owned by the General Partnership (GP) vehicles behind private equity are bought or sold.
Bloomberg reported in October that the secondaries market had its biggest ever year in 2024 and is on track to reach $200m for the first time this year, an increase of 25% on that record.
Secondaries are a contentious species of transactions to work on. Their buyers, known as limited partnerships (LPs), might be family offices, pension funds or endowment funds. They are often complicated transactions in which a PE fund moves an asset that it can’t/doesn’t want to sell from one fund to another so it can raise money from new investors and use that to cash out investors in the previous fund. In doing so, the GPs can make more carried interest by earning a percentage of profits relative to the new price rather than the initial one. They can even earn carried interest if an asset sells for a lower price than it was first bought for via secondaries market shenanigans.
Vamshi Eppanapally, a Wharton MBA student, has worked in the PCA teams of multiple boutique banks including Greenhill (now part of Mizuho) and Devon Park Advisors (now part of PWP); in an interview with Wall Street Oasis, he said that “everyone wants to get into [PCA]” and that he’s frequently hosting dinners for fellow students looking for PCA jobs.
The teams in PCA work on two broad categories of transaction: ‘GP-led’, and ‘LP-led’. ‘GP-led deals’ are when assets are moved into a new fund as mentioned above. ‘LP-led’ deals are when an investor sells a stake in a PE vehicle to another investor without any assets being moved around; Eppanapally said these are less interesting “plug and chug” deals, with lawyers working on the more complicated aspects.
GP-led transactions are what you want to work on. Eppanapally said that those deals are faster paced with more unique structuring considerations and a similar style of modelling to mergers and acquisitions (M&A) transactions.
Eppanapally previously worked in M&A too. He said “M&A is already a very mature industry,” whereas the comparatively new secondaries market is still evolving with “a lot more nuances and a lot more interesting structuring considerations.” PCA’s advantages include having much more responsibility and exposure to clients due to working on leaner teams. You’ll develop modelling skills similar to M&A bankers, while also working on capital raises like an ECM or DCM banker. Because of your exposure to PE clients, it also offers excellent exit opportunities.
PCA teams are a big priority for the banks that have them. Jefferies reportedly lengthened non-competes for senior bankers in its PCA team in August, and even added 30-day non-competes for analysts and associates. Other banks, including Moelis & Co, are looking to rapidly expand their teams. Bloomberg reported in October that Evercore’s PCA team is the biggest in the space, with ~150 employees and ex-UBS MD Nigel Dawn at the helm. Openings for PCA analysts in New York at these banks can pay up to $150k in salary, while associates can earn up to $250k.
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