From my understanding, a Private Equity firm's only revenue streams are its management fees and carried interest. As a firm, what is the purpose of going public? Can you use the stock proceeds to create another fund, collect mgmt fees, increase the company's value, and continue the cycle?
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Same reason any company goes public. $
Can a Public PE Firm use IPO proceeds to invest as equity (e.g. create a new fund)? If so, how is that any different than their current fundraising? Besides salaries and office rents, what would a PE firm need to raise public capital for?
they don't have to repay the money!!
By going public they can build a pool of permanent capital to invest in their funds, they can also allow some employees to monetize their stakes in the firms, plus other reasons common to other companies
Can you elaborate on this? I would think there are restrictions for using IPO proceeds as a fund itself. Why go through the time and effort to raise public capital (IPO) when the firm is already focused on fundraising efforts for their funds?
IPO proceeds would be used to invest into their own funds alongside LPs, as GP (PE firms) must make a commitment to the fund as well
Why did Blackstone go public? Why did Lehman? Same reason: not a capital problem, but greedy partners.
This. When Carlyle went public, David Rubenstein was asked why he was taking the company public. His answer: "Well, as an owner, when you build some value, you want to monetize it". There's zero strategic value in going public.
To monetize the management company.
A couple reasons that ik of: Firstly, the owners of the private equity firm want to monetize their stake in the company instead of just collecting on carried interest and fees. Secondly, some of the money raised can provide permanent capital. Yes the PE can raise outside funds but investors will eventually withdraw capital (whether unexpectedly or expectedly depending on partnership contracts) - so having permanent capital allows the firm to make PE investments freely on their own timelines and without worrying about dealing with fund investor complaints and concerns. That permanent capital can also be used when the firm needs some extra capital to facilitate an existing deal. Also, going public allows the company to establish its reputation and also legacy.
This is not a bad answer. I don't know who shit on you, but fuck them. Have a banana to make it right.
So the founders can cash out and enrich themselves while simultaneously passing on their comfy and generous expense base onto public shareholders since LP's are getting more stingy about management fees.
OP, they'd go public for many of the same reasons as other companies.
Classic example is to help current owners of LP/GP positions to liquidate their holdings - for example, if I'm the founder of a PE fund and I'm on the verge of retirement, I may have a stake in the management company worth several billion dollars to cash out. Rather than find another billionaire or billionaires to buy my stake, which entails a host of negotiation hurdles, I can IPO my management company and divest myself of my holdings in doing so. I get cash, the shareholders get part of what I used to own.
The GP also has a constant need for capital for a variety of other activities. Every time a sponsor floats a fund, there are GP commitments that go in alongside the LP commitments - think of it as skin in the game for the manager. By IPOing, the management company gets capital that can be deployed as GP commitments, obviating the need for this money to come out of the pockets of the employees of the manager. In the case of a mega fund, this is probably advantageous, as the number of funds that one of those managers floats in a year is huge, and I could imagine it becoming onerous for the employees to have their personal wealth deployed across so many commitments.
I could speculate about other uses of this capital. Direct lending by PE funds and other "shadow banking" entities has increased substantially in the past few years. I would also not be surprised if management company capital can be used for any of the following purposes:
The list goes on.
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