
Carlyle IPO May Meet Skepticism
NEW YORK (
) -- Despite reports that private equity stalwart
Carlyle Group
is preparing for an initial public offering, some analysts remain skeptical of the benefits of the firms selling share in the public markets.
"Investors and traders are not enamored with the business model of buying firms at dimes on the dollar and trying to sell them with little intervention sometimes in a year or less for a profit," says Scott Sweet, senior managing partner at IPO Boutique. "The market in 2010 has forced many of the private equity spin-offs to be priced at significant discounts to their original filing."
Carlyle plans to file for the IPO in late 2011, and a stock sale will likely occur the following year, according to a report by
Bloomberg Businessweek
.
William Conway, a founding partner and managing director at Carlyle said in the report that the firm was having trouble raising capital and the public offering would provide, "significant advantages to having a lot more capital."
Fund raising by private equity firms has been trickling in over the past several months, so many are gradually turning to the public markets to raise more capital. PE and venture funds raised $68.8 billion during the first nine months of 2010, a 10% decline when compared to the same period last year, according to
Dow Jones LP Source.
"I think it is a trend that we are going to see played out," said Michael Kim, associate director at Sandler O'Neill + Partners. "We have seen this with
Blackstone
(BX) - Get Report
,
Fortress
(FIG)
,
KKR
(KKR) - Get Report
and
Apollo
. More firms are likely to follow. Any of the big guys are a good place to start."
Carlyle's IPO has been long in the making. The firm has been considering an IPO since June 2007, when Blackstone Group started trading on the New York Stock Exchange.
Carlyle wasn't the only private equity firm to wait out the financial crisis. KKR first filed to go public in 2007, but decided to wait until the economy was more stable. KKR transfered its stock listing to the NYSE from Europe in July. Apollo Global Management jumped on the IPO boat in March 2010, filing for a $50 million initial public offering.
However, private equity's reception in the public markets has been poor, Sweet explains.
"I am of the opinion that if any of the non-public private equity firm's like Carlyle and
Texas Pacific
(TPG) chose to go public they would be met with a very tepid reception," says Sweet. "The companies are still left with tremendous debt, but the big winners are the private equity firms in paying themselves huge dividends for the transaction."
Kim, on the other hand believes that each firm is different and investors will weigh the offering on the fundamentals of each firm.
--Written by Maria Woehr in New York.
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