Inflexion did not envisage taking the three companies it has recently exited through initial public offerings to the public markets, Infexion partner Richard Swann said.
Speaking on a panel at the BVCA High Growth Conference, Swann said, “It’s a great time to be a seller of assets. Our eyes have been opened to the public markets.”
In March, the buyout firm announced that the £232 million ($365 million; €327 million) flotation of Sanne Group on the London Stock Exchange had netted a realised and unrealised return of 3.7x on its original investment made in 2012. The partial exit of the trust and administration services company generated an IRR of 80 percent. The firm retained an 11 percent stake valued on listing at £26 million.
In June 2014, Inflexion sold all of its shares in FDM Group, a UK IT services company, through a £308 million IPO on the LSE that returned 16.2x money on its original investment made in 2010, according to a statement.
A month previously, Inflexion announced a partial exit of the UK’s NAHL Group, which operates National Accident Helpline, on the AIM market in London. The firm retained a 15 percent stake in the company that listed with a market capitalisation of £82.5 million, generating a realised and unrealised return of 3.7x. Inflexion first invested in the group in 2009.
When asked about limited partner concerns regarding the impact on returns of lockup periods and a gradual exit, Swann noted that “when we floated, a couple of LPs have wondered at the lock-in period and what is the realised return. With all three [exits] we have got out in full in nine months.”
For a PE firm, IPOs have three key drawbacks, Swann commented: they are costly, you don’t know the price you will receive for your asset until the day of the sale, and if you pull the process it’s difficult to go back. He noted that the first job when preparing for an IPO was to convince the management of its portfolio companies that a listing was a good idea.
PE firms continue to exploit the buoyant IPO market. Apax Partners realised €255 million through its partial exit of its stake in UK IT security company Sophos Group through an IPO that began on 26 June, as reported by Private Equity International. The sale generated a return of more than 2.5x.
Also in June, Vision Capital exited the majority of its 80 percent stake in Stockholm-based banking group Nordax Group on Nasdaq Stockholm. That followed its floatation in May of its portfolio company Elegant Hotels Group, a Barbados hotel chain, on AIM.