EQT’s [STO:EQT] sale of a 6.7% stake in Galderma Group [SWX:GALD], the Swiss skincare company, last week was a multi-billion boost to sponsor-backed follow-on volumes, with two sources close to the situation saying it was an ideal test of the market demand for sponsor-backed block trades.

The selldown, which saw EQT and Galderma co-investors Auba Investment and the Abu Dhabi Investment Authority sell CHF 1.28bn (USD 1.45bn) of shares in an upsized deal, attracted large institutional investors because of the quality of the asset, which created significant demand, the sources noted.

The deal helped lift sponsor-led follow-on issuance in 2024 YTD to USD 17bn, up from USD 12.5bn last year, according to Dealogic data, as sponsor issuers continued to increase their participation in the aftermarkets.

Figures this year were also bolstered by an earlier sell-down in Galderma alongside placements in the London Stock Exchange [LON:LSEG] and Bureau Veritas [EPA: BVI].

Sponsors took advantage of the improving conditions this year to monetise their holdings.

Volumes this year marked a recovery after sell-down issuance plummeted from USD 22bn in 2021 to USD 6.3bn in 2022.

The collapse came as the equity markets faced significant headwinds, including rising interest rates, heightened market volatility, and reduced investor appetite for riskier assets.

Volumes recovered in 2023, mainly due to three London Stock Exchange selldowns last year which totalled USD 8.2bn. Without those transactions, volumes were just USD 4.3bn and deal numbers in 2023 were lower than a poor 2022.

Looking ahead, sponsors will likely continue to increase selldowns in the aftermarket with lock-up periods for several sponsors expiring in the near term, including Triton’s 33.5% stake in Renk Group [ETR:R3NK] ending on 3 December, and Apollo Asset Management’s 51.5% stake in Lottomatica [BIT:LTMC] expiring on 23 December.

The Galderma selldown will boost sponsor confidence in market liquidity. However, not all stocks will be as in-demand and each sponsor must assess the suitability of pursuing a follow-on offering on a case-by-case basis, the sources close to the Galderma deal noted.