While company founders and venture investors have been reaping gains from the listings market’s recent rebound, private equity has hardly benefited.
Divestments by buyout firms have been woefully absent from the $13.7 billion of US initial public offerings so far this year, even as the total has risen to more than three times the volume for the same period in 2023, according to data compiled by Bloomberg. Only two private equity-backed IPOs over $100 million have been completed so far, raising about $1 billion, data from PitchBook shows.
The meager number of private equity-backed IPOs is a sharp fall from the 110 recorded in 2021, according to PitchBook’s data. Only 2 of their portfolio companies went public in 2022, and 10 last year, the data shows, illustrating the journey to recovery that the exit pipeline for buyout firms has been on for the past two years.
Recent signs of a sustained recovery in the IPO market is boosting hopes that private equity-backed offerings may return to the norm of around 30% of activity, said Garrett Hinds, senior research analyst, private equity at PitchBook.
“With the strengthened public markets, things are shaping up well for IPO exits,” Hinds said. “This should inspire more PE-backed companies, particularly those in maturing funds, to pursue a public listing.”
Global private equity divestments sank to their lowest quarterly total of in more than three years in the first quarter, according to S&P Global Market Intelligence, as higher interest rates continued to drag on private equity deal activity. There was $81.2 billion worth of divestments in the first quarter, 22% lower than the same period last year, according to Preqin data compiled by the firm.
“Private equity has been waiting to sell a position in their portfolio companies for a while,” said Andrew Wetenhall, co-head of equity capital markets Americas, at Morgan Stanley. “Selling down is a normalcy as well as a practicality to the PE model.”
Lately, things are looking up. The two investors in cruise operator Viking Holdings Ltd. — TPG Inc. and pension fund manager Canada Pension Plan Investment Board — boosted the number of shares they offer by 9 million to 42 million shares, raising the offering size to as much as $1.3 billion. Viking’s offering is set to price later Tuesday.
Aerospace and defense parts maker Loar Holdings Inc. — backed by Blackstone Inc.’s credit investment arm and Abrams Capital — posted a 74% rise on debut last week, making it the third best performing IPO over $100 million this year, according to data compiled by Bloomberg.
That stands in contrast with the rough start to the year seen by KKR & Co., which floated BrightSpring Health Services Ltd. in a $693 million offering in January. The community-based health-care services provider’s shares fell 15% on debut and have been treading under since, amid concern about the firm’s debt burden. BrightSpring will report earnings on Thursday.
This article was provided by Bloomberg News.