How Secondary Markets and Strategic Buyers Create Liquidity

When Navis Capital Partners closed a $230 million continuation vehicle for its Southeast Asian K-12 school portfolio and ChrysCapital structured a $700 million Continuation Vehicle (CV) to retain its NSE stake, they weren’t signalling market dysfunction. They were engineering liquidity through mechanisms that preserve carry whilst addressing LP capital constraints.

Private equity portfolios across Southeast Asia hold $95 billion in unrealised value as traditional exit channels remain constricted. Yet between 2023 and 2024, the region witnessed $12 billion in General Partner (GP)-led secondary transactions, $8 billion migrating to continuation funds and $18 billion in strategic M&A exits. Understanding why these new channels emerged requires examining the capital now trapped in aging portfolios.

The Exit Overhang: Why $95 Billion Remains Trapped

Southeast Asia’s private equity assets under management reached $180 billion in 2024, with $95 billion in unrealised portfolio value – companies acquired between 2018 and 2022 that remain unsold as market conditions shifted, according to Bain & Company and Preqin data.

The pressure is structural. Limited Partners (LPs) facing capital calls whilst distributions lag historical norms are scrutinising GPs’ exit capabilities. Fund lifecycles approaching years 8-10 threaten GP economics and future fundraising. Portfolio companies acquired at 8-10x EBITDA now justify 10-12x EBITDA valuations through operational improvements. Yet, traditional exits remain blocked. Southeast Asian IPO activity sits 45% below 2021 levels, whilst strategic buyers have grown selective.

This mismatch between portfolio maturity and exit availability created demand for alternative liquidity mechanisms. GP-led secondaries emerged as the solution.

 

GP-Led Secondaries: From Distressed Tool to Strategic Exit

Asia-Pacific GP-led secondary transactions reached $35 billion in 2024, with Southeast Asia accounting for $12 billion, according to Evercore, Lazard and Campbell Lutyens data. Single-asset continuation vehicles accounted for $36 billion globally, nearly doubling from the prior year. What began as emergency liquidity mechanisms has evolved into deliberate portfolio management.

The commercial logic is compelling. A sponsor holding a Southeast Asian fintech platform acquired in 2019 at 9x EBITDA, now valued at 15x EBITDA with paths to 18-20x through regional expansion, faces constrained options. A strategic sale at 12-13x leaves upside on the table. An IPO remains uncertain. A continuation vehicle solves both: existing LPs receive immediate liquidity at fair value whilst the sponsor retains the asset with fresh capital to pursue full value creation.

Transaction structures have matured. Early Asian GP-led deals cleaned up legacy portfolios at steep discounts. Current transactions target “trophy” assets – market leaders with defendable positions. Pricing reflects this shift: transaction-weighted average discounts narrowed to 13.3% in H1 2025, with mega buyout funds trading at 9% discounts.

The most sophisticated form – ⁠the continuation vehicle – addresses the fundamental mismatch between fund duration and Southeast Asian value creation timelines.

 

Continuation Funds: Extending Duration Without Sacrificing Returns

Between 2023 and 2024, $8 billion in Southeast Asian PE assets transferred to continuation vehicles, according to Evercore, Campbell Lutyens and PJT Partners data. These are deliberate portfolio management tools aligning GP and LP incentives around long-term value creation whilst providing immediate liquidity.

Traditional PE funds operate on 10-year cycles. Southeast Asian companies often require longer; regulatory approvals take 18-24 months, market consolidation plays out over 5-7 years. Continuation vehicles provide this duration without violating fund mandates or forcing value-destroying premature sales.

A healthcare platform spanning Indonesia, Vietnam and the Philippines, acquired in 2020 at $300 million, now generates $50 million EBITDA with paths to $100 million EBITDA through M&A rollup. A traditional exit at 10x yields $500 million. A continuation vehicle allows the sponsor to provide existing LPs immediate liquidity whilst pursuing higher EBITDA targets with fresh capital, potentially exiting at 11-12x in 2027-2028.

LP participation remains modest – approximately 10% roll into CVs, according to Campbell Lutyens data, creating opportunities for secondary buyers comfortable with concentrated positions.

Whilst GP-led secondaries provide sophisticated liquidity engineering, traditional strategic M&A remains the most reliable exit mechanism for sponsors seeking complete, certain exits.

Strategic M&A: Japanese, Korean and Chinese Buyers Create Liquidity

Strategic M&A exits totalled $18 billion in 2024, demonstrating that corporate acquirers still provide the clearest path to complete liquidity, according to Refinitiv and Mergermarket data. The buyer universe segments into three groups pursuing different strategic rationales.

Japanese corporates – ⁠trading houses (Mitsubishi, Mitsui) and industrials (Hitachi, Panasonic) – view PE-backed companies as regional expansion vehicles, targeting logistics platforms, renewable energy developers and B2B software. Korean chaebols (Samsung, LG, SK Group) focus on semiconductor supply chain companies and battery material processors to secure manufacturing capacity. Chinese buyers (Alibaba, Tencent, ByteDance) target digital economy assets, though regulatory scrutiny around data sovereignty has narrowed opportunities.

Strategic buyers consistently pay 10-12x EBITDA for market-leading assets with clear synergies. Second-tier assets command 7-9x. The challenge isn’t pricing. It’s timing and certainty. M&A processes consume 6-12 months and face collapse risk. Sophisticated GPs run dual-track processes – negotiating strategic sales whilst preparing continuation vehicles as backstop options.

This exit activity functions efficiently because of infrastructure Singapore has deliberately constructed.

Singapore’s Infrastructure: Asia’s Secondary Market Hub

Singapore’s emergence as the regional hub reflects deliberate policy. The Variable Capital Company (VCC) structure provides flexibility unavailable elsewhere; umbrella structures with segregated sub-funds, tax transparency and simplified reorganisations critical for continuation vehicles. Leading secondaries houses – Coller Capital, Ares, Apollo – established Singapore offices to leverage this.

Secondary advisory capabilities matured in parallel. PJT Park Hill, Evercore, Jefferies and Morgan Stanley built dedicated Asia GP-led teams over 2023-2024, primarily in Singapore. This provides sophisticated advisory support – structuring CVs, negotiating LP terms, sourcing buyers – previously available only in London or New York. Southeast Asian GP-led deals now close in 4-6 months versus 9-12 months historically.

With infrastructure operational, sponsors face the practical question: which exit strategy matches which portfolio asset?

Decision Framework: Matching Exit Strategy to Portfolio Position

 

For Sponsors with Trophy Assets (Market Leaders, High Growth)

Continuation vehicles offer optimal economics. Assets valued at 12-15x EBITDA with credible plans to reach 15-18x justify extended hold periods. Target candidates: fintech platforms with 40%+ market share, healthcare rollups approaching consolidation end-states, logistics networks expanding into underserved geographies. Valuations typically command 8-10% discounts to NAV.

For Sponsors Seeking Immediate Liquidity (Fund Approaching End-of-Life)

Strategic M&A provides certainty. Japanese corporates, Korean chaebols and Chinese buyers consistently pay 10-12x EBITDA for quality assets with identifiable synergies. The process consumes 6-12 months but delivers complete exits. Critical success factors: quantifiable synergies, clean regulatory profiles, and management teams willing to integrate. Dual-track processes maximise optionality.

For Sponsors with Mid-Tier Assets (Solid But Not Trophy)

LP-led secondaries create portfolio liquidity. Rather than selling companies directly, sponsors facilitate LP portfolio sales at 85%-90% NAV, providing investors exits whilst retaining GP upside. Transaction volumes reached $121.5 billion globally in 2025, according to Jefferies data. This works particularly well for diversified portfolios where 2-3 assets drive most value but smaller positions create drag.

Looking Forward: Secondaries as Permanent Infrastructure

Global secondary transaction volume reached $225 billion in 2025, up 45% from 2024, according to Campbell Lutyens. This is permanent infrastructure addressing the mismatch between PE fund durations and value creation timelines.

Three catalysts will drive Southeast Asian secondary growth through 2026-2028: 2020-2022 vintage funds reaching years 3-5 (the optimal CV window), persistent LP capital constraints despite ongoing calls for new funds and strategic buyers increasingly viewing PE-backed companies as viable acquisition targets.

The critical question for Southeast Asian GPs isn’t whether secondary markets create liquidity – the $12 billion in GP-led transactions and $8 billion in continuation funds demonstrate this. The question is whether sponsors engineer portfolios with secondary optionality from acquisition, structure governance to support eventual CVs and build relationships with buyers capable of executing complex transactions.

The $95 billion in unrealised Southeast Asian PE value won’t monetise through IPOs alone. It will exit through strategic M&A for certain liquidity, GP-led secondaries for value preservation, and continuation vehicles for duration extension; engineered by sponsors who recognise that exit optionality now determines IRR outcomes as much as operational value creation.