PortCo IPO vs Sale to a Strategic/Financial Buyer?

Hi All -

For a PE firm, when deciding a path to exit what are some considerations between taking the PortCo public vs. exiting to a strategic/sponsor?

Ideally, from the best price you could fetch, I think the pecking order would put sale to a strategic first but what could be some scenarios in which an IPO would make more sense from a returns standpoint?

Thanks in advance.

 
Most Helpful

IPOs are great publicity typically so funds like to do them from that perspective (most funds really tout it when they bring a company public) but they’re also hard because there’s typically a lock up on share sales, so you might end up holding the bag if markets tank (happened to plenty of funds this year). Typically IPO candidates need to be “better” companies from a growth perspective - typically can’t take a manufacturing co that is growing 5% with 10% margins public unless it is absolutely massive.

Strategic sales are typically seen as “sexier” but typically rarer and less reliable.

Typically funds don’t decide strategic vs sponsor when they launch a sale process, they go to both and see who bids more. Usually a strategic is the goal because of (in theory) outlier multiple, but more often than not that is a pipe dream and there isn’t some strategic that’s going to pay and outsized price.

Other consideration is you can roll equity when you sell to a sponsor (say, keep 40% of the equity) and get a “second bite of the apple” as PE people love to say

 

Delectus et aperiam qui eaque. Laboriosam culpa qui dolor et voluptatem dolor sunt voluptatem. Quis dolores ad quod cumque ea ea. Repudiandae ipsam rerum odio eveniet quos ratione rerum hic.

Delectus autem occaecati aut quo consequatur quo deserunt. Molestias id porro corrupti ea. Voluptas ut tenetur ea.

Illo rerum ab minus magni eligendi aspernatur. Beatae assumenda eaque repellendus accusantium omnis voluptatem. Omnis qui optio itaque minus distinctio et voluptate.

-- sm

Career Advancement Opportunities

May 2024 Private Equity

  • The Riverside Company 99.5%
  • Blackstone Group 99.0%
  • Warburg Pincus 98.4%
  • KKR (Kohlberg Kravis Roberts) 97.9%
  • Bain Capital 97.4%

Overall Employee Satisfaction

May 2024 Private Equity

  • The Riverside Company 99.5%
  • Blackstone Group 98.9%
  • KKR (Kohlberg Kravis Roberts) 98.4%
  • Ardian 97.9%
  • Bain Capital 97.4%

Professional Growth Opportunities

May 2024 Private Equity

  • The Riverside Company 99.5%
  • Bain Capital 99.0%
  • Blackstone Group 98.4%
  • Warburg Pincus 97.9%
  • Starwood Capital Group 97.4%

Total Avg Compensation

May 2024 Private Equity

  • Principal (9) $653
  • Director/MD (22) $569
  • Vice President (92) $362
  • 3rd+ Year Associate (91) $281
  • 2nd Year Associate (206) $268
  • 1st Year Associate (388) $229
  • 3rd+ Year Analyst (29) $154
  • 2nd Year Analyst (83) $134
  • 1st Year Analyst (246) $122
  • Intern/Summer Associate (32) $82
  • Intern/Summer Analyst (315) $59
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”