Should You Hire an Advisor or Run a GP-Led Tender Process Internally?

At F2H, we bring white-glove advisory to secondaries, capital raising, and M&A under $150m – delivering the sophistication of top-tier investment banking to small GPs, LPs, and companies. If you’re thinking of running a GP-led tender process or any other liquidity solutions for LPs, contact us today to start the conversation.

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Introduction

General partners (GPs) increasingly use tender offers to provide liquidity to their limited partners (LPs). In a tender, existing LPs are given the option to sell part or all of their fund interest to a secondary buyer at a market-clearing price, while new or existing investors step in to purchase the exposure.

For GPs, tender processes can improve investor relations, attract new LPs, and address liquidity needs without forcing an outright fund sale. But they come with conflicts: the GP is both the fiduciary for selling LPs and the sponsor of the ongoing fund. That makes the decision to hire an investment bank advisor versus running the process internally particularly critical.

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What “going it alone” means for GPs

• Direct negotiation: The GP approaches one or a handful of secondary buyers directly.
• Simplified execution: The GP sets price and terms bilaterally, then presents them to LPs.
• Cost savings for LPs: No advisory fees, which can run into millions for larger processes (typically paid from LP sale proceeds).
• Control: The GP maintains complete control over timing, buyer selection, and messaging.
• Risks: Without competition, pricing may be suboptimal, and LPs may perceive the process as conflicted or unfair.

Going alone can work for very small, straightforward tenders with a cooperative LP base. But in most cases, the optics and conflicts make it risky.

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What an advisor brings to GP-led tenders

Process fairness and optics

• Advisors ensure the process is transparent, fair, and defensible to LPs.
• They serve as an independent check on valuation and buyer selection.

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Market access

• Advisors run outreach to multiple secondary funds and institutional buyers.
• They create competitive tension to improve pricing and terms.

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Execution management

• Handle NDAs, data rooms, and diligence requests.
• Coordinate timing so multiple bids arrive simultaneously.
• Reduce the burden on GP staff.

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Negotiation

• Help structure pricing, mechanics (pro-rata allocations, minimums/maximums), and closing terms.
• Advise on balancing certainty of close with competitive pricing.

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Governance support

• Advisor-led processes provide a documented record that the GP upheld fiduciary duties to LPs.
• This reduces reputational and even legal risk.

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Pros of hiring an advisor

• Improves LP trust: Demonstrates fairness, transparency, and alignment.
• Maximizes pricing: Competitive processes yield tighter discounts or higher clearing prices.
• Reduces conflict risk: Advisors mitigate the perception that the GP favored itself or certain investors.
• Saves time: Advisors manage the process, freeing GP teams to focus on portfolio management.
• Protects reputation: A well-run tender strengthens GP-LP relationships.

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Costs and downsides of hiring

• Fees: Advisory fees are typically 1–5% of NAV transacted, which can be significant. These fees are usually paid out of LP sale proceeds.

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When going alone can work

• Known buyer: A pre-arranged transaction with a strategic or existing LP.
• LP alignment: Where LPs explicitly support a bilateral solution.
• Low sensitivity: Funds where conflicts are minimal and liquidity is straightforward.

But these scenarios are rare—most GP-led tenders involve complex dynamics and reputational stakes that favor advisor involvement.

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Decision framework

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Best practices if hiring

• Select secondaries specialists: Not every banker understands GP-led secondaries—choose one with a proven track record.
• Align outreach strategy: Agree in advance on how broad or targeted buyer outreach should be.
• Communicate with LPs: Involve advisors in crafting clear, transparent LP communications.
• Negotiate fees: Ensure advisory fees scale reasonably to transaction size.
• Stay in the driver’s seat: The GP should remain the decision-maker; the advisor runs process, not strategy.

Conclusion

GP-led tenders sit at the intersection of liquidity, governance, and fiduciary duty. While going it alone may save fees, it often exposes GPs to reputational risk, suboptimal pricing, and potential LP dissatisfaction.

An advisor not only improves outcomes but also strengthens trust between GPs and LPs by ensuring fairness and transparency. For most tender offers—especially at scale—hiring an advisor is the safer and more effective path.

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At F2H, we bring white-glove advisory to secondaries, capital raising, and M&A under $150m – delivering the sophistication of top-tier investment banking to small GPs, LPs, and companies. If you’re thinking of running a GP-led tender process or any other liquidity solutions for LPs, contact us today to start the conversation.

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