Introduction
Tender offers and strip sales are mirror images. In a tender offer, every limited partner (LP) decides whether to sell and the portfolio stays whole; in a strip sale, no LP decides anything and every company is partly sold. Corporate finance has the same pair, a buyback that pays only holders who choose to sell against a dividend that pays everyone, as buybacks versus dividends explains. Both belong to the general partner (GP)-led family mapped in the GP-led overview, and both are far smaller than the continuation vehicle (CV): Evercore's 2025 secondary market report puts GP-led volume outside CVs, meaning tender offers and GP-led preferred equity, at about $12 billion of $106 billion. Advising on either means judging which liquidity problem each solves better than a CV, a call the private capital advisory (PCA) banker makes before any buyer is contacted.
How a GP-Led Tender Offer Works
The GP runs a process to find one or more secondary buyers, and the winner offers to buy LP interests in the existing fund at a stated price, usually a percentage of net asset value (NAV) at a reference date. Each LP tenders all, part, or none of its interest. The fund keeps its portfolio and its limited partnership agreement (LPA); the buyer steps into each seller's capital account. GCM Grosvenor's March 2022 paper on GP-led secondaries notes that the sponsor's fee and carry are not typically reset in a tender, though the fund's life may be extended.
- Tender Offer (GP-Led)
A liquidity process in which a general partner arranges for one or more secondary buyers to offer every limited partner in an existing fund the same price for its fund interest, usually as a percentage of NAV. Each LP chooses whether and how much to sell; the fund and its terms continue unchanged for those who stay.
One Price, a Maximum, and Proration
Every tendering LP receives the same price, which is the product's fairness argument. The buyer, though, sets a maximum purchase against its concentration limits and appetite for the fund, and may need a minimum level of tenders to make the work worthwhile. When tenders exceed the maximum, each is scaled back by proration. An illustrative case at 94% of NAV:
| Item | Amount |
|---|---|
| Buyer's maximum, in NAV | $300 million |
| NAV tendered | $450 million |
| Share of each tender accepted | Two-thirds |
| LP tendering $30 million of NAV sells | $20 million, for $18.8 million cash |
| NAV that LP keeps | $10 million |
The LP wanting out still owns a third of its tender, and the oversubscription tells the GP something: the price was generous, or its investors wanted more liquidity than one buyer could absorb.
Documents, the Window, and the LPs Who Stay
Each LP receives an offer document with the price, maximum, deadline, and transfer terms, while the buyer diligences the fund in a data room the GP controls. The window is partly a legal question. Whether a GP-arranged offer is a tender offer under US securities law turns on an eight-factor test courts generally apply; where it is, the SEC's guidance on limited partnership tender offers says Regulation 14E applies to unregistered securities too, including a 20 business day minimum offer period, and that bidders should disclose whether oversubscribed tenders will be accepted pro rata. The public-company version is covered in how tender offers work in M&A.
The default also runs the other way from a CV. The Institutional Limited Partners Association (ILPA) recommends treating LPs that ignore a CV election as sellers; an LP that ignores a tender simply stays, so silence never helps the buyer reach its minimum.
Why GPs Run Tender Offers, and the Price of the Staple
GP motives in general are catalogued in why LPs and GPs need liquidity. A tender serves three especially well:
- Resetting the LP base before a fundraise. Investors that want out leave on the GP's terms, replaced by a buyer likely to back the next fund.
- Price discovery. The tender price is an outside mark on the whole fund; near NAV it supports the GP's marks.
- Simplicity. No company changes hands, so change-of-control provisions are unlikely to bite and no carry crystallizes.
The Stapled Commitment and Its Conflict
The contentious feature is the stapled primary commitment: the GP asks the buyer to commit to its next fund alongside the secondary purchase. A buyer pricing that package may pay less on the secondary than it would alone, so the difference funds the GP's fundraise rather than the sellers' proceeds, or pay close to NAV and seek better terms on the primary.
ILPA's 2019 guidance on GP-led processes lists "a tender offer with stapled primary" among processes that should be efficient and transparent, and says a GP that clearly benefits through a stapled commitment should share some transaction costs, a principle its 2023 guidance repeats. That is best practice, not law; how buyers value the package is covered in stapled secondaries.
The Asian Venture Capital Journal (AVCJ) reported in December 2018 what it called by some distance the biggest tender-plus-staple completed in Asia, noting that comparable deals had seen buyers offer about $0.50 of new capital per $1 bought on the secondary.
Strip Sales: A Slice of Every Position
A strip sale moves the decision from the LPs to the fund, which sells the same percentage of each portfolio company, or of a defined group, to a buyer, typically through a vehicle the same GP manages. Proceeds go to every LP pro rata, or, GCM Grosvenor notes, stay in the fund as dry powder for follow-ons. The GP keeps managing everything.
- Strip Sale
A GP-led transaction in which a fund sells an identical percentage of its interest in each portfolio company, or in a defined subset, to one or more secondary buyers, usually through a vehicle the same GP manages. Proceeds are distributed pro rata or retained for follow-ons, and no LP makes an individual election.
Warburg Pincus ran one on a regional subset in 2017. According to a Dow Jones report at the time, buyers led by Lexington Partners and Goldman Sachs' asset management arm took slightly over a fifth of every Asian investment in Warburg Pincus Private Equity XI, an $11.2 billion fund: about $1.2 billion across 29 companies. Warburg kept managing the sold stakes in lockstep with the fund, speeding cash back to investors and cutting Asian exposure from about half the fund to roughly 40%.
Why a Strip, and What the Buyer Prices
The main attraction is that cash reaches every LP pro rata, so distributions to paid-in capital (DPI), the metric in reading a fund track record, rise across the whole LP base. The conflict is lighter too: no assets move into a vehicle with reset economics for rollers, though the buyer's vehicle is usually GP-managed, so its terms still need scrutiny.
The buyer's position explains the price. It takes a minority, passive slice of companies it did not choose, strong and weak together, with exits timed by the GP, and prices the slice against NAV rather than re-underwriting one company. If it demands a priority claim ahead of the fund's LPs, the deal stops being a strip and becomes preferred equity, covered in preferred equity and structured fund solutions.
Tender Offer, Strip Sale, or CV: How a GP Chooses
The three tools answer different questions about who needs cash. Partial-stake CVs sit between the last two columns, as continuation vehicles explained notes.
| Tender offer | Strip sale | Continuation vehicle | |
|---|---|---|---|
| Fits when | Some LPs want out | All LPs need cash; GP keeps every asset | Chosen assets need time or capital |
| Cash goes to | Tendering LPs | Every LP, pro rata | LPs electing to sell |
| Who decides | Each LP | The GP, within LPA powers | GP launches; each LP sells or rolls |
| GP economics | Unchanged; staple may help fundraise | Unchanged in the fund | Carry may crystallize; terms reset |
| Price evidence | Whole-fund price | Portfolio-slice price | Lead's price on chosen assets |
Market data rarely isolates either product, so any volume quoted needs its definition.
The cleanest way to hold the three apart is by what each changes after closing. A tender changes the ownership of the fund: some investors leave and a buyer, often a future LP in the next vintage, takes their seats. A strip changes the fund's stake in each company and leaves the investor register untouched. A CV changes the vehicle that owns the company, and on what terms. A GP keeping both its investors and its assets reaches for a strip; one keeping the portfolio but letting restless investors go runs a tender; one needing more time for particular companies accepts the full conflict review of a CV.
