PE Firms Upping Their Game in Public Markets

In March, Silver Lake Management completed its $500 million investment in cybersecurity giant Symantec ( (SYMC) ). The PE firm injected $500 million in principal amount of 2.5% convertible senior unsecured notes due 2021 with an initial conversion price of $21 per share.

The New York-based private equity firm's investment came less than a year after it injected a $1 billion investment in Motorola Solutions. ( (MSI) ), also purchasing convertible senior notes.

Silver Lake isn't the only financial sponsor to essentially take stakes in publicly traded companies. Over the years, buyout shops have steadily injected money in public companies as they search for creative, yet sustainable ways to bring in capital -- a trend that will continue since they represent a relatively low-risk investment opportunity for financial sponsors that have experienced pressure on returns.

"PE funds have a lot of capital they need to deploy. They're always looking for ways to do that," said Sonny Allison, a partner at Perkins Coie.

Competition among PE firms means fewer places to invest at the private market level, which is forcing hands of financial sponsors to look at the public market for opportunities, he said.

"It's a natural avenue to deploy the capital," Allison added, observing that companies with stagnant or struggling stock prices have typically attracted stake investments from PE firms.

Blackstone Group ( (BX) ) invested $820 million in NCR ( (NCR) ) convertible preferred shares in late 2015. ATM manufacturer NCR, which had been reviewing strategic alternatives and facing pressure from activist investor P. Schoenfeld Asset Management prior to the Blackstone investment, is using the funding for repurchasing up to $1 billion of common stock.

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