FEATURED INSIGHTS
IPO reversals: More newly public companies return to PE hands
The number of companies that have been taken back into private equity ownership after five years or less on the markets is rising once again.
So far this year, PitchBook data shows there have been 13 PE take-private deals worth a total $24.6 billion involving previously PE-backed companies that have been public for less than five years. The number suggests a return to a trend seen prior to the pandemic, when 40 such deals worth a combined $85.3 billion took place between 2017 to 2019.
IPO U-turns
Following the COVID-19 outbreak, 2020 saw just seven IPO u-turns, with another seven in 2021 among them the $14 billion take-private of cybersecurity company McAfee by a consortium including Advent International, the Canada Pension Plan Investment Board, Crosspoint Capital Partners and Permira.
The trend has since re-established itself, with 29 deals worth $53.9 billion taking place between the start of 2022 through roughly the end of June.
"The growth in public-to-private transactions this year is a continuation from last year's sell-off in recently listed stocks," said Per Einar Ellefsen, co-founder of Amundsen Investment Management. "Small caps, and those who recently performed IPOs in particular, underperformed severely in 2022."
Switzerland's SoftwareOne is a recent target for PE firms, despite its floating public market shares just four years ago. Bain Capital's $3.2 billion offer for the company was rejected by its board. The firm's offer of 18.50 Swiss francs a share (just under $20) was a premium to recent closes, but SoftwareOne floated at 18 Swiss francs a share in 2019.
Another reason that more recent entrants to public markets may be willing to accept offers from PE firms is due to the rising use of passive investment products, according to Ellefsen.
He said it takes time for companies to get to the size and liquidity needed to be included on the major indices provided by companies such as FTSE Russell. While figures vary, Morningstar estimated in May of this year, passive funds that mirror market indices held 38% of globally invested money which by extension goes into the respective index's companies. With this, compounded by burdens including quarterly reporting and being at the mercy of market sentiment, the prospect of returning to private hands becomes all the more appealing.
Correction: An earlier version of this article incorrectly reported the total value of PE take-privates in euros instead of US dollars. (July 7, 2023)
Source : pitchbook.com
Related Posts
Many Strategies Fail Because They’re Not Actually Strategies
Many strategy execution processes fail because the firm does not have something worth executing.
The...Read more
Advanced AI Techniques for Financial Fraud Detection
Financial fraud is a serious risk area for companies of all sizes, and technology usually identifies and prevents it....Read more
Careers In Corporate Finance, From Hedge Funds to M and A
Corporate finance is a key pillar on which modern markets and economies have been built. And this complex ecosystem c...Read more
How can we help you?
Get in touchwith us.