David Lee, Managing Director in Duff & Phelps Transaction Opinions practice, published an article in Secondaries Investor discussing the limitations of using net asset value (NAV) as a basis for pricing GP-led secondary transactions and the important role that independent analysis and fairness opinions can play in the process.
In the article, David explains the potential for mis-pricing a GP-led secondary recap due to the significance placed on the GP-determined NAV for the asset. He outlines scenarios where the resulting NAV may not fully reflect the right value.
According to David, the surest way to determine if NAV reflects reality is to perform a fundamental valuation of each of the individual assets in the GP-led recap. He highlights how independent valuations and fairness opinions can be risk-mitigating tools for GPs and how they can provide valuable information to the limited partner advisory committee and the LPs.
Read the full article here.
