What's in the box?

Secondary buyouts have grabbed many headlines this year, with the media trying to make the most out of recovering private equity deal activity. “Pass the parcel” seems to be the new buzz phrase for 2010, while the negative connotation of this seems to be taken for granted. After all, private equity funds are still sitting on a large amount of “dry powder” (one of last year’s favourites) and are now using as much of it as possible to acquire portfolio companies from fellow private equity houses, clearly willingly accepting lower returns. Such transactions are bound to underperform, aren’t they? Not quite.