Stapled Secondary

Two transactions are economically connected

A stapled secondary links a secondary purchase to another capital commitment, commonly a new primary fund investment with the same sponsor.

The secondary component provides liquidity for an existing position. The “staple” gives the sponsor additional capital or a new investor relationship.

SEC-filed disclosures describe stapled primary investments as transactions where a buyer purchases interests in an existing fund while concurrently making a primary commitment to a new fund raised by the same GP.^[1]

Why sponsors use staples

A sponsor may want to accomplish two objectives at once:

• create liquidity for existing LPs
• raise capital for a successor or new fund

A buyer interested in gaining access to the new fund may be willing to evaluate the secondary position as part of a broader relationship.

That can help transactions clear, but it can complicate price discovery.

The main conflict is cross-transaction economics

Suppose a buyer agrees to:

• purchase a $40 million secondary interest
• commit $75 million to the GP's next fund

The GP benefits from the new primary commitment and may therefore care about more than the highest standalone price for the secondary interest.

Existing LPs want the secondary sale process to maximize value for the position being sold.

Those objectives can conflict.

SEC disclosures explicitly identify this tension between maximizing value for existing investors and obtaining capital for a new fund.^[1]

Example

Buyer A offers 92% of NAV for the secondary position and no new-fund commitment.

Buyer B offers 90% of NAV but also agrees to a large commitment to the sponsor's next fund.

From the sponsor's broader business perspective, Buyer B may be more attractive.

From the selling LP's perspective, Buyer A offers the higher secondary price.

A well-run process should make clear how those competing economics are handled.

A staple is not automatically improper

Bundling transactions can create legitimate commercial value.

For example, the buyer may provide:

• deeper sponsor relationship
• faster execution
• a larger capital solution
• certainty around both liquidity and fundraising

The problem is not the existence of multiple components. The analytical issue is whether one component subsidizes another without transparent treatment.

What investors should examine

Relevant questions include:

• Was the secondary price tested independently?
• Could buyers bid on the secondary without making a primary commitment?
• Were primary and secondary economics evaluated separately?
• Who benefits from any lower secondary price?
• How were transaction expenses allocated?
• Were conflicts disclosed to affected LPs?

The SEC-hosted secondaries presentation shows how sponsor-led liquidity and capital solutions increasingly overlap across the private-market ecosystem.^[2]

Common mistakes

“Stapled secondary means two fund interests are sold together.”

Not necessarily. The defining feature is the linkage between the secondary transaction and another capital commitment or sponsor transaction.

“The highest total relationship value equals the best secondary price.”

No. Total sponsor economics and selling-LP economics can differ.

“A new primary commitment always lowers the secondary price.”

Not necessarily. The negotiated package can work in multiple directions.

“Staples eliminate buyer competition.”

They can affect competition, but the outcome depends on how the process is structured.

A stapled transaction should be decomposed into its components. Evaluate the secondary price as if it stood alone, then separately evaluate the value and obligations of the primary commitment. Blended economics can otherwise hide who is funding the benefit received by another party.