Investment Firm Lexington Partners Explores Sale

Among the interested bidders are large private-equity firms including KKR & Co., the people said.

The process is still at an early stage, and there is a chance a deal won’t happen.

With seven offices around the world and more than $55 billion in committed capital since its inception, Lexington is one of the largest independent players in the burgeoning field known as private-equity secondaries.

Private-equity funds typically have a lifespan of around 10 years, and investors such as pension and sovereign-wealth funds historically have struggled to cash out before then. Such investors might want out for a variety of reasons, including a shift in strategy or a need to free up cash for other purposes.

The rise of the market for secondaries has made private equity a more liquid asset class, with firms such as Lexington, Paris-based Ardian and the Strategic Partners unit of

Blackstone Inc.

raising billions of dollars for the purpose of purchasing stakes in existing buyout funds from other investors.

Some firms have also launched secondaries businesses dedicated to real estate and credit investments.

Some $196.9 billion in assets globally were dedicated to investing in private-equity secondaries as of the end of 2020, according to Preqin, up from $21.6 billion in 2016. The growth comes against the backdrop of huge fundraising hauls and a wave of buyout activity by private-equity firms, as their yield-hungry investors put more money into the asset class while interest rates have remained low. Shares of publicly traded private-equity firms have soared, and some that were previously private have opted to list shares.

For KKR, which doesn’t have a secondaries business, Lexington would give it a sizable platform from which to operate. On a conference call in May, the firm said it was evaluating the secondaries market and determining whether to buy a business or build one organically.

Since it was founded in 1994, Lexington has acquired more than 3,600 secondary and co-investment interests—in which investors put money directly into a deal alongside the fund—in transactions totaling $65 billion, according to its website.

The market’s rapid acceleration has made it an attractive growth area for large asset managers, particularly publicly traded ones.

Ares Management Corp.

closed a $1.08 billion deal in June to buy secondaries firm Landmark Partners LLC.

Write to Miriam Gottfried at Miriam.Gottfried@wsj.com and Cara Lombardo at cara.lombardo@wsj.com