PE-Backed IPOs Exceed USD10bn This Year
Friday, February 25, 2011

The number of private equity-backed buyout IPO and private placement exits increased significantly during 2010, and the trend is set to continue over the coming 12 months, according to new research.

Preqin, the alternative asset research firm, reports that 145 IPOs and share sales with an aggregate value of USD38.7bn occurred in 2010. This is twice the aggregate value seen in 2009 and a 12-fold increase from 2008. 17% of private equity-backed exits in 2010 came from IPOs, a significant increase from 2008 when they accounted for just 5%.

PE-backed IPOs in 2010 surpassed pre-financial crisis era levels with a 12% and 29% increase in the number of PE-backed flotations in comparison to 2006 and 2007, respectively.

In 2011 to date there have been 11 IPO exits worth a collective USD10.2bn. This includes the refloating of Kinder Morgan earlier this month, only the second exit ever to raise over USD2bn. Shares were priced above the expected range due to strong demand.

According to Preqin, there is an abundance of forthcoming exits in the pipeline. HCA Inc. plans to price its IPO in the 2nd week of March. If it prices at the top of its expected range it will be the biggest PE-backed IPO in US history raising approximately USD3.7bn.

Trade sales continue to dominate the exit market, accounting for 53% of exits in 2011 to date. Secondary buyouts and restructurings account for the remaining 25% and 7% respectively.

Manuel Carvalho, Manager, Deals Data at Preqin commented: “As market conditions have started to improve, private equity firms have been able to exit some of the investments made during the boom era. There have already been several notable private equity-backed buyout exits in 2011, and with numerous forthcoming proposed deals in the pipeline, 2011 looks set to be a record breaking year for these exits. However, investors are now more cautious about the level of leverage at which a company operates, with many now expecting the private equity company to hold stakes in the operating company and use the proceeds from the IPO to pay down debt. This could impact on the success of the IPOs of the more highly leveraged companies from which private equity firms are seeking to exit."