PitchBook News - When private equity goes public

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The Weekend Pitch

July 25, 2021

Presented by Masterworks

Private equity is an increasingly public business in Europe. This week, UK-based Bridgepoint Advisers became the latest PE investor in the region to go public when it completed an IPO on the London Stock Exchange, valuing it at £2.9 billion (about $4 billion). And it's not the only firm to have stock market ambitions of late.

I'm Andrew Woodman and this is The Weekend Pitch. You can reach me at andrew.woodman@pitchbook.com or follow me on Twitter via @adwoodman.

(VELEZGREENE/Getty Images)

LVMH-backed L Catterton is also reportedly eyeing a listing, either via an IPO or through a merger with a blank-check company (which would be a first for PE). Antin Infrastructure, a PE firm that invests in telecom, utilities and other sectors, is also said to be considering a public debut. And Forward Partners, a UK venture capital firm, has announced its intentions to list in London. This signals that private equity is becoming more of a mainstream asset class than its reputation as an "alternative" suggests.

That said, going public isn't a new thing for European private equity. London's 3i Group, Swiss secondaries specialist Partners Group, France's Tikehau Capital and Sweden's EQT are all listed. It's an even more established option in the US, where PE behemoths such KKR, Apollo Global Management, The Carlyle Group and Blackstone all trade publicly.

A PE firm going public may feel like a contradiction in terms. After all, the appeal of the asset class is that portfolio investments do not encounter the same kind of disclosure demands or shareholder pressure that public companies do. On the face of it, it seems counterintuitive that a PE firm would choose to meet those constraints.

Yet it makes sense why a firm like Bridgepoint, whose investments include chains like Asian food brand Itsu and coffee-shop operator Pret A Manger, would decide to go public now. For starters, the market conditions are favorable; shares in the company soared by as much as 30% on its first day of trading. The IPO has furnished Bridgepoint with a war chest of £271 million in proceeds for future acquisitions and given it the ability to raise fresh equity in the future.

(Chris J Ratcliffe/Getty Images)

Bridgepoint's offering is also a sign that the European PE industry is maturing.

"What we are seeing in the private equity industry is an asset class that has graduated from the fringes of the capital markets and is closer to the mainstream," said Dominick Mondesir, a senior research analyst for EMEA private markets with PitchBook. "And with this, more buyout shops are transitioning from companies driven by founders to entities that are more institutional in nature, which is driving IPO activity."

But the benefits of going public also bring a trade-off by raising a firm's profile.

Already, Bridgepoint's high-level compensation packages have drawn scrutiny. The firm's IPO prospectus revealed, for example, that it had paid £1.75 million to Archie Norman, a former UK member of parliament and current chairman of retail chain Marks & Spencer, to join its board as a non-executive director in a £200,000-a-year role. It also revealed the pay of several others.

This news by itself isn't very controversial, but it is the type of information that Bridgepoint wouldn't previously have needed, nor likely wanted, to share. The firm's prospectus as a whole also gives fresh insights into how much money PE firms make—a potentially sensitive topic at a time when a recent series of PE buyouts is causing alarm in the UK.

When things are going well, being public can work to a GP's advantage. This isn't only because of the increased access to capital. The prestige of being listed—and the increased accountability that comes with higher, public-market standards—likely plays well with transparency-minded LPs looking to provide funds.

But while it is easy to expect a new wave of PE firms aiming to follow in the footsteps of Bridgepoint and its publicly traded peers, these firms are likely to remain exceptions for an asset class that has traditionally favored a high degree of confidentiality.

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Quote/Unquote

"From seed- to growth-stage investors, we need a full ecosystem of climate tech funds."

—Greg Smithies, partner at Fifth Wall, on the rise of climate-focused investors

Datapoints

Early- and late-stage venture capital deal terms have become 2.7 times and 3.3 times more startup-friendly, respectively, over the past decade, a trend that has only accelerated in the past year, according to a new PitchBook analyst note.

The VC Dealmaking Indicator aims to quantify the balance of power between startups and investors, taking into account capital supply and demand, deal terms, valuation step-ups and other metrics.

Did you know ...

... That more than a quarter of private equity buyout deals in the US have been priced above 20 times EBITDA so far in 2021?

What's driving prices? The industry has accelerated its shift to high-growth companies, and investors are making up for time lost in the early stages of the pandemic by deploying dry powder more freely.

Deal Flow

(Burazin/Getty Images)

Private markets aren't just for large institutional investors anymore. And venture capitalists are seizing the moment.

Retail participants are moving into the private markets as the range and depth of the alternative investments landscape increases. A growing number of them are angling to make allocations in VC funds.

Making up a big bulk of these smaller limited partners are family offices, private wealth managers and accredited investors who number in the millions.

That's the market targeted by a fundraising platform called Allocate, which this week announced a $5 million seed round of its own. Led by former Silicon Valley Bank VC fundraising specialists, the startup is backed by firms including Tusk Venture Partners and the Urban Innovation Fund. Co-founder Samir Kaji says Allocate's digital marketplace of VC fund opportunities has a waiting list of more than 1,000 investors who want to join the platform.

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This edition of The Weekend Pitch was written by Andrew Woodman, Alec Davis and James Thorne. It was edited by Alec Davis, Angela Sams and Liana Scarsella.

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PitchBook News - When private equity goes public

Quote/Unquote

Datapoints

Did you know ...

Deal Flow

Recommended reads

Older messages

Who's winning: Investors or startups?

Index Ventures hauls in $3B+

A hot streak for climate tech funds

Measuring the VC dealmaking environment

VC returns spur nontraditional investors

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