How many recent private equity-backed IPOs have there been?
After a few lean years at the turn of the decade, private equity-backed IPOs returned with a bang in 2014 as over 30 financial sponsor-backed companies came to market (either the Main Market or AIM) raising, between them, in the region of £10bn. Many of these raised primary funds to significantly pay down or eliminate leverage and therefore avoided some of the wider market criticism of previous cycles. In 2015, private equity-back IPOs raised the overwhelming majority of all IPO proceeds raised that year – at that point, the public markets were valuing businesses greater than trade or private equity. Since then, although activity has receded slightly from that high-water mark, over half of all recent IPOs have been private equity-backed and those IPOs have raised more than non-private equity-backed businesses. As the financial institutions still have significant cash to deploy, an IPO is still a very credible liquidity event, but we are seeing increasing dual-track processes in order to generate competitive tension in processes.
How do private equity-backed businesses perform post-IPO?
Not only do private equity-backed IPOs perform well at the time of floatation, they tend to out-perform their non-private equity-backed rivals post-floatation as well, with such companies trading significantly better as against offer price following IPO. Therefore, any shares held over in the business post-IPO can continue to increase ROI for the private equity house.
Full exit at IPO?
Since 2009, more than half of proceeds raised in private equity-backed IPOs have been raised by selling shareholders (to include, as well as private equity houses, founders and other early stage backers exiting at the same time) providing private equity houses with returns on their investment at this stage. However, private equity houses are not always able to achieve a full exit at IPO and, in return for the ability to capitalise on part of their investment, selling shareholders are usually obliged to entered into lock-up arrangements over the remainder of their holdings. The average period for such restrictions is usually in the region of 180 days post-IPO.
How can Osborne Clarke help you?
Osborne Clarke advised on 3 of the 17 private equity-backed IPOs in 2017 (Medica Group plc’s £121m main market IPO, Alpha Financial Markets Consulting plc’s £126m AIM IPO and Arena Events Group plc’s £60m AIM IPO) and also advised LDC on the £200m AIM IPO of Team 17 Group plc in May 2018. Prior to that, we have advised on the private equity-backed IPOs of Fever Tree, Patisserie Holdings, Joules Group and Blue Prism; some of the most successful IPOs of recent years.
No matter what industry your portfolio companies are in, if you are contemplating an exit do not hesitate to get in touch with one of our experts to consider whether an IPO (either as a standalone process or in conjunction with private or trade sale) is suitable for your company.