Public market exits surge

Private equity-backed IPOs are on the rise, though their performance has not been as strong as 2009 figures.

Public listings by private equity-backed companies have increased more than 1,000 percent during the first half of 2010 as compared to the first half of 2009. There were 62 IPOs during the first half of the year, up from five in the same period in 2009. Likewise, the value of the deals raised in the first half of 2010 was significantly higher: $15.4 billion compared to $578 million in H1 2009, according to research released by Ernst & Young.

Some of the IPOs contributing to the figures include BC Partners’ €748 million (£631m; $965m) float of German chemical distribution group Brenntag in March, and Polaris Venture Partners' $187.5 million IPO of drug maker Ironwood Pharmaceuticals in February.

Heading into the third quarter, the trend looks set to continue with approximately 52 private equity-backed companies waiting to go public, according to the research. Some of the largest companies being prepared to float include Bain Capital- and Kohlberg Kravis Roberts-backed Toys R Us, which filed to raise up to $800 million. The two private equity firms are also behind what is expected to be the largest private equity-backed IPO this year: the listing of hospital chain HCA, which filed to raise up to $4.6 billion.

Another large IPO in the works is that of Neilson Corp, a media company that filed to raise as much as $1.75 billion and is backed by firms including Thomas H Lee, KKR, The Blackstone Group and the Carlyle Group.

Despite an uptick in volume and value, private equity-backed IPO performance through mid-July was down from 2009 figures, Ernst & Young found. The average private equity-backed IPO deal in the first half of 2010 was up 3.3 percent from its initial offering price through 13 July. In 2009, that same average closed out the year up 11.6 percent from its initial offering price.

Private equity-backed IPOs in the Asia-Pacific region posted the strongest performance, with 19 listings averaging a gain of 13.9 percent from their offering price. In comparison, 11 EMEA floats averaged 2.2 percent, and the 32 listings in the Americas posted an average loss of 2.5 percent from their IPO price.

The study comes amid a report from Ipreo, a capital markets data provider, which found private-equity backed IPOs had outperformed the S&P 500 by an average of 7 percent in the in the first half of 2010.