Report: PE-backed IPOs underperform market

The majority of private equity-backed flotations in Europe have underperformed other IPOs in recent years, according to new research.

Companies floated on European stock exchanges following a period of private equity ownership have not performed particularly well, according to an analysis carried out by Financial News.
The newspaper has reviewed the share price performance of 330 IPOs that raised more than $50 billion (€40 billion) since the beginning of 2003 and found that the average return on private equity-sponsored new offerings was 73 percent, compared to 137 percent for other flotations.
For deals marketed in 2005, the figures were 18.4 percent and 29.7 percent respectively. In 2006, IPOs backed by private equity have fallen by an average of 4.8 percent compared with 0.3 percent for other flotations.
Although 2004 bucked the trend and saw private equity-sponsored issues outperform the rest of the IPO markets, Financial News said that this was largely down to a small number of very successful offerings such as Cambridge Silicon Radio, which had backing from 3i and Scottish Equity Partners.
Companies backed by Goldman Sachs Capital Partners have performed best since listing on the European public markets, with three of the four listings trading up since 2003 and a trading up average of 116 percent, the only firm in the sample to have doubled money for institutional investors buying into its IPOs. Rounding out the list were HM Capital, formerly Hicks Muse Tate & Furst, 3i, Barclays Capital and Kohlberg Kravis Roberts.