BVWire has cautiously commented that so much of the observed recent increase in deal activity comes from PE firms selling assets to other PE firms. Appraisers might question whether the prices paid and deal structures have much in common with “fair market value” as we know it from Rev. Ruling 59-60, USPAP, and SSVS-1.  Or does the domination of our transactional economy by secondary buyouts somehow alter the typical fair market value approaches and conclusions?

A new report by PitchBook confirms what most appraisers have suspected about the middle and upper-middle market.  In the last year and a half, 182 U.S.-headquartered companies have been sold by one PE investor to another, according to the PitchBook Platform. Eight of those secondary buyouts have been billion-dollar deals. So far this year, 49 secondary buyouts have been completed, putting 2011 behind last year’s deal pace. During 2010, 133 secondary buyouts were closed. The B2B (business-to-business) industry has accounted for 36% of the secondary buyout activity, making it the most active in this sector. The second most active is the B2C (business-to-consumer) sector, which posted a 31% share.

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