Ambivalence or adapting to ever-changing climate?

This summer saw both the largest European buyout and exit of the year so far, with BC Partners' $3.3bn acquisition of Springer Science from EQT and Government of Singapore Investment Corporation.

The deal emerged several days after EQT announced the company was destined for the public markets. However, BC Partners scuppered IPO plans after it returned to the vendors with a more attractive offer. According to reports, BC had initially offered around $3bn but EQT was expecting to dispose of the company for $3.5bn. Eventually it sold for €3.3bn.

Despite making public its intention to list the German publisher, EQT continued to hold talks with potential buyers.

The other major display of indecisiveness came in early July when after planning to list portfolio company Deutsche Annington, private equity owner Terra Firma cancelled because of low investor demand. In less than a week the firm renewed its IPO plans, halving its initial €1.2bn target to €575-592m.

Private equity's relationship with institutional investors has been a turbulent one. However, in the second quarter of this year, there have been signs of change with the level of private equity-backed IPOs starting to increase. Over the past two months we have seen the successful listings of CVC's Matas in Denmark and bpost in Brussels.

Institutional investors are understandably disenchanted with the asset class's preference for dual-track processes. The enthusiasm and sheer effort involved in engaging with institutional investors, selling the growth story and the company's future potential quickly becomes a source of frustration when another private equity firm decides to cough up the cash and take the business in one fell swoop.

The on again/off again exit of EQT's ISS saw three U-turns on decisions to list between 2007 and 2011, as well as a handful of failed sales process, notably to G4S in November 2011. The commotion attracted a great deal of attention from the media Europe-wide. But, rather than slamming EQT for not being able to sell the facilities services business, the general tone taken by commentators was more sympathetic.

Making an exit
Achieving a strong exit is a GP's most crucial function. The company acquired, the price paid and the improvements and growth implemented during the investment period are all focused on ensuring the business can be sold profitably. With this in mind, it is surprising we haven't seen a larger number of confused and ambivalent sales processes, especially in the past four years where debt markets have risen and fallen overnight and public markets have been somewhat volatile.

The asset class has been berated for not adapting to the new economic climate in recent years and rightfully so; the post-crash environment requires innovative approaches to investing and developing companies.

However, could it be that playing off institutional investors, secondary and even trade buyers is one of the effects of adapting to this much demanded change? Of doing whatever is possible to ensure the best exit is achieved, and that LPs receive the maximum returns? In the Springer Science case, the vendors achieved a price close to original expectations, no mean feat in today's market. In Deutsche Annington's case, the decision in the US to end quantitative easing spooked the market and its private equity owners simply adapted to the ever-changing sentiment of institutional investors.

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• BC Partners
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