IPO exits: The two faces of public markets

John Bakie
30 April 2010

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This month saw the biggest private equity IPO since the financial crisis hit, with Amadeus IT Holdings, a travel reservations specialist, listing on the Spanish stock exchanges, raising €1.33bn. John Bakie reports

The exit by Cinven and BC Partners is the latest of many private equity attempts to realise investments via public markets, and could be an indicator that listing portfolio companies is once again becoming a viable exit route.

Unquote" research shows private equity IPO activity so far this year has already reached the volume seen over the whole of 2009, with six portfolio companies listed to date.

The value of these exits has rocketed. In 2009, total money raised through private equity IPOs was less than €1.3bn, while 2010 has so far seen over €3.3bn raised via stock exchanges.

This substantial rise in the value of investments being exited through public markets comes as no surprise. In early 2009, European stock markets hit lows not seen since the dot.com crash, and were virtually closed for business, clearly an unattractive exit route for this reason. Unquote"'s own research saw no deals exited in this way from Q3 2008 through to the end of Q1 2009, demonstrating the dire state of stock exchanges.

But, with a strong recovery underway - the FTSE All Share is up around 60% compared with its low in March last year - and lower volatility in public markets, IPOs are once again becoming an effective way to exit companies.

However, the public markets may not yet be as reliable as they were in the pre-crunch years.

A number of attempted flotations have not gone to plan. Earlier this year, unquote" found that many private equity professionals did not believe public listings would be successful. Indeed, several companies, including New Look, Travelport and Merlin, were forced to ditch plans to go public earlier this year.

Amadeus is probably not the only large IPO we will see in this quarter. CVC Capital Partners is expected to float Belgian postal service, De Post - La Poste, in the near future for up to €700m.

While flotations have been hit or miss in early 2010, the improving economic picture in Europe - Greek troubles aside - should result in public investors more consistently looking to pick up well managed portfolio companies with a strong track record.