What are the Key Points of Negotiation in a Secondary?
There are three key sets of negotiations during a secondary transaction: • initial purchase price for the portfolio of interests being sold; • purchase and sale agreement between the buyer and seller; and • transfer documentation among the buyer, seller and fund managers of the interests being sold. Purchase Price The purchase price in a secondary transaction is usually based on the value of the interests being sold as of a set date, which is referred to as the cut off date. The cut off date is tied to the date of the most recent NAV calculations and the purchase price is driven by the NAV (it is either at par or at a discount or premium to NAV, depending on the buyer’s valuation). At the closing of each transfer, the purchase price has a dollar-for-dollar adjustment for capital contributions made by the seller (increase in purchase price) and distributions received by the seller (decrease in purchase price) since the cut off date. Historically, prices have trended close to par with on
