Exit options for BIG LBOssss
When PE firms do mega buyouts - like taking a public company private for 10-20 Bn - what is the realistic exit strategy they would have in mind? Would it be that they’d IPO? Let’s assume that they want to sell down entire stake in 5 years. Div recap gives you the money but still leaves you with ownership. And hard to envision a strategic buyer / financial buyer buying something for 20-30 bn that was just sold off a few yearS ago for 10bn...how do mega cap buy outs end??! Would love to hear examples.
IPO/Strategic sale/Break down the business in small bits.
IPO/Strategic sale/Break down the business in small bits.
You can’t IPO all it at once can you.
Strategic sale has a very limited Universe of strategic buyers if you’re talking EV > 20bn. Financial buyers unwilling to cough that much
Break down is not feasible / possible if the business model is not distinct across segments. Think retail like Nordstrom
If you work in PE shouldn’t you know the answer to this one already?
Ideally you wouldn’t buy a business that can’t be broken up or sold if you’re opposed to an IPO otherwise it just sits in your portfolio. But to your IPO point you can’t sell it all at once yes but you slowly sell it off until your stake is 0 or de minimus.
I don’t work in large cap lbos
Refinitiv is a good recent example - carved out of Thomson Reuters by BX in 2018, announced strategic sale to LSE last summer.
Generally speaking, public-to-private LBOs of those size don't usually work out well from an IRR standpoint. But once you work in PE long enough, you'll realize quickly PE is not about hitting home runs on every deal as it is about keeping the music going on fundraising, and a big driver of fundraising is putting cash to work. This is particularly the case when you're at a megafund.
Always wondered about this as well, especially given multiples tend to be pretty high already at that point.
Like another poster said though, I feel like outperforming the S&P 500 and avoiding too much correlation is really the goal VS pure 1337 IRR @ MFs.
If it's a good biz just FCF that MF'er straight into your pockets for the next 10 years.
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