Bankers See More Fortunes to Be Made From Europe Buyout Boom
Europe’s biggest private equity firms have made a fortune on fees over the past few years. Now bankers are trying to persuade them that this is the perfect time to seize on public investors’ desire to grab a slice.
Investment bankers are pitching firms including Permira and Ardian SAS on pursuing an initial public offering, according to advisers who are making such appeals. And there are at least some signs of openness to the idea. L Catterton, a Franco-American private equity firm backed by billionaire Bernard Arnault, has held early talks with banks about the possibility of a listing, though it hasn’t decided whether to go ahead, advisers said. CVC Capital Partners has been weighing up the idea internally.
The early success of IPOs by Britain’s Bridgepoint Group Plc and Paris-based Antin Infrastructure Partners SA, whose shares rose 29% and 26% respectively on their recent debuts, has encouraged banks to pitch aggressively to other buyout firms. The more muted response to Goldman Sachs Group Inc.’s Petershill Partners listing in London hasn’t quelled enthusiasm for the sector.
A successful listing of a private equity firm requires a certain size and some diversification, according to the bankers. Having 10 billion euros ($11.6 billion) of assets under management, or committed capital, is seen as the cutoff point to getting an acceptable level of profit and valuation. CVC, Permira and Ardian are among European firms that would fit this profile and would be ready for public markets, the advisers said.
CVC has been informally discussing the possibility of an IPO, although there aren’t any concrete preparations underway. Financial advisers say they’ve been pitching to Ardian and Permira in recent weeks. Other possible candidates featured on bankers’ scratch books include Inflexion Private Equity Partners and Apax Partners.
Spokespeople for each firm declined to comment.
Listing a private equity manager had hitherto been a rare event in Europe, where many of the biggest firms remain private partnerships. The sector, though, has been on a roll in recent years with record fundraising and deal volumes pushing valuations ever higher, a point not lost on advisers keen to steer clients toward a fee-generative IPO, nor on firms’ partners who are thinking of ways to monetize their stakes.
Shares in Sweden’s EQT AB have risen about 430% since it joined the stock market in 2019, while stock in Switzerland’s Partners Group Holding AG -- Europe’s largest listed private equity group -- has trebled in five years. The biggest U.S. private equity firms such as Blackstone Inc., KKR & Co. and Carlyle Group Inc. listed in the past couple of decades and have all seen their market values soar.
“Public markets remain very receptive to private-capital investment vehicles at the upper end of the market, particularly since many have demonstrable track records of outperforming other asset classes over an extended cycle,” said Robert Ohrenstein, global head of private equity at KPMG.
Benefits of an IPO include adding liquidity to aid succession planning and provide stock incentives for staff; stock listings also give smaller institutional and retail shareholders exposure to an asset class in which they can’t directly invest, Ohrenstein said.
Going public also allows the historically secretive industry access to additional capital to build businesses. Petershill said it would fund further stakes in other private-markets firms with the money raised. Bridgepoint, the first London private equity IPO of any significance since 1994, plans to expand into new strategies including infrastructure and real estate while increasing its U.S. presence.
An IPO also brings closer scrutiny of operations and senior staff compensation. Swedish regulators last week announced an investigation into how EQT revised the terms of a share lock-up, while Bridgepoint has been criticized for not disclosing performance fees paid to individual executives -- known as carried interest.
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