Here’s an interesting coincidence:
In the 4th quarter of 2007 private equity companies were putting a tremendous amount of cash to work buying assets: $95.3 billion in total sponsor-backed M&A (mergers and acquisitions), according to Thomson Reuters.
It was also the quarter that followed the IPO (initial public offering) of one of the industry’s most legendary firms: Steve Schwarzman’s The Blackstone Group.
Fast forward (past the credit crisis) to the 4th quarter of 2010: private equity companies have put $57.8 Billion to work this time around in sponsor-backed M&A. That’s the busiest Q4 since that 2007 banner year. And it just so happens that this quarter follows the IPO of the industry’s other legendary firm: Henry Kravis’ KKR.
So as M&A fever hits a milestone, it seems private equity senses the moment is ripe for a public debut. Yet Blackstone—which just Tuesday raised $15 Billion in its largest-ever fund— has performed miserably as a public entity: trading at around $14 per share, down more than 50 percent from its IPO price of $31.
So why are some money managers seeing opportunity in private equity stocks this time around?
One word: exits.