Direct equity secondaries

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The case for direct equity secondaries

A key advantage of direct equity secondaries that attracts investors is the typical caliber of the companies. Through minority stakes, investors gain access to high-quality private equity-backed businesses that have moved beyond the discovery phase, often already created significant value and still offer meaningful upside. Today, many of these investments are transacted off‑market, which is why an experienced team and broad platform are needed to execute the strategy.

For private equity sponsors, direct equity secondaries can generate liquidity without forcing a premature full sale of high‑conviction assets. Historically, the share of investments returning over 3x invested capital has been a key differentiator between top‑quartile and bottom‑quartile managers. Sponsors recognize the importance of retaining these high-quality assets within the fund while also needing to manage liquidity at the portfolio level. This balancing act has become even more critical in today’s constrained liquidity environment. Direct equity secondaries help to reconcile these objectives.

Continuation vehicles have become an established source of alternative liquidity in response to structural changes in private equity. Direct equity secondaries complement this solution by offering a flexible and targeted way to access high‑quality assets at an earlier value creation stage within the fund.

Continuation vehicles

Well suited for mature portfolio companies that have delivered strong performance over an extended period
Designed for assets where the fund manager wishes to initiate a new holding period in a new fund structure
Allow the fund manager to retain control of the company, while representing a full exit from the perspective of the selling fund
The selling fund and its investors give up exposure to future value creation and upside potential

Direct equity secondaries

Well suited for high-quality companies held in relatively young portfolios that still offer significant upside potential
Focused on companies that are expected to be important contributors to long‑term fund performance
The fund manager maintains control and continuity by only selling a minority stake, typically 20% to 30%
Partial liquidity is created for the fund, while a substantial share of the asset’s future upside potential remains within the fund for the benefit of the original investor base

Role in the portfolio

Direct equity secondaries aim to combine the strengths of secondaries investing with the most compelling features of buyout investments:

Differentiated access to high-quality assets with significant upside potential
Greater control over portfolio construction and reduced blind pool risk, as investments are selected on a deal-by-deal basis rather than through partially invested fund interests
Improved cash flow profiles, supported by shorter holding periods
Typically limited or no J-curve
Potential for higher realized returns on capital or Total to Value Paid-In Capital (TVPI) as almost all committed capital is invested from day one and compounds from the outset
Improved gross-net spread, given that minority stakes are held directly and are mostly negotiated with no management or performance fees

There are multiple direct equity secondary transaction structures addressing the different capital needs of a private equity manager:

Equity recap: buy a minority stake in a company from a fund manager that has control over it to provide partial liquidity while allowing for the extension of the holding period
Follow-on financing: provide fresh capital for a company to complete an acquisition or other growth investments
Minority secondary: replace existing minority investors in the company to focus on governance or re-align interests

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A leading direct equity secondaries platform

We believe the success of direct equity secondaries strategies is based on disciplined sourcing and execution. LGT Capital Partners has one of the longest track records in direct equity secondaries. Our investment approach is underpinned by:

A global platform and longstanding relationships with private equity managers, built over more than two decades
Ongoing tracking of over 39,000 companies and systematic analysis based on proprietary data and insights
Rigorous assessment of asset quality, governance structures and alignment of interests with the fund manager
Careful structuring and negotiation of key investor protections, including minimum holding periods, return thresholds and other downside elements

Our direct equity secondaries activities are driven by a global team of more than 70 capital solutions professionals. This senior group of Partners, Principals and Executive Directors has an average of 19 years of industry experience and an average tenure of 13 years with the firm.

Why partner with us

The direct equity secondaries market is difficult to access. Transactions are typically negotiated bilaterally, rather than through broadly marketed processes, and participation often requires the ability to identify liquidity needs, assess compelling assets and execute transactions in an unstructured market.

LGT Capital Partners combines a long-established global private markets platform with deep secondary market expertise. Our relationships with leading private equity sponsors and early insights into potential transactions aim to provide investors with access to differentiated opportunities.

H&MV EngineeringDirect equity secondaries investment

H&MV Engineering is an engineering services business headquartered in Ireland. The company specializes in high-voltage substations and focuses on renewable energy generation, battery storage and data centers. The business has seen strong growth since it was acquired by Exponent in 2022. LGT Capital Partners’ investment in 2024 provided capital to expand the company’s presence globally and further accelerate growth.

BarbriDirect equity secondaries investment

LGT Capital Partners partnered with Francisco Partners, which has held a majority stake in Barbri since 2021, through a minority recapitalization. Under Francisco Partners’ ownership, the company has evolved from a test preparation-focused company to a technology-enabled platform provider of learning solutions across the full spectrum of needs for aspiring lawyers to experienced legal professionals. LGT Capital Partners’ investment supported continued investment in Barbri’s professional learning offerings, as well as its European expansion initiatives.

NemeraDirect equity secondaries investment

Nemera designs, develops and manufactures complex drug delivery devices for pharmaceutical, biotech and generics customers worldwide. With the support of Montagu and Astorg, Nemera has grown in both scale and strategic value over their six years of ownership. In 2025, LGT Capital Partners joined as a minority investor to help the company enhance its portfolio, expand manufacturing capacity and invest in innovation and operational excellence to meet rising global demand.