Private equity backed IPOs outperform the rest
Investor who bought into initial public offerings (IPOs) backed by private equity are securing 15 per cent more on average than non-private equity backed offerings, research reveals.
A study by international financial advisory firm, Rothschild, in association with
Australian Private Equity & Venture Capital Association Limited (AVCAL) found that private equity backed IPOs delivered higher returns than other offers.
AVCAL chief executive, Yasser El-Ansary, said research assessed the performance of IPOs over a three year period between 1 January 2013 and 31 December 2015, and found that private equity backed IPOs that listed since 2013 have achieved an average return of 40.9 per cent, outperforming non-PE backed IPOs by more than 15 per cent.
"We've seen a consistent pattern of private equity backed IPOs outperforming on average over the last three years," he said.
"Despite short-term fluctuations year-to-year, the evidence shows that returns are being delivered to investors over the longer term by companies that were previously backed by private equity.
"The fact that these companies continue to perform once the private equity firm begins to sell down, or has exited, its stake demonstrates the sustained value that private equity can bring to an investee company.
"At the same time private equity funds have performed exceptionally well for their investors, including many superannuation funds, which have committed an estimated $8.4 billion of super money to Australian private equity and venture capital funds."
The research came in the wake of comments by Platypus Asset Management chief investment officer, Don Williams, who reported that the fund manager had steered clear of "obnoxious" price IPOs coming from private equity in the latter half of 2015
"Towards the end of last year there was some obnoxious pricing from some IPOs, and typically those didn't get away," he said.
"We passed on a lot of IPOs that were good companies, because we just thought the pricing was obnoxious, and it won't surprise you to hear that most of those were coming out of private equity."
AUTHOR
Nicholas O'Donoghue
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