European private markets managers are opting for initial public offerings as a means of obtaining additional capital to grow their business at a time when public markets can promise attractive valuation multiples.
Several privately run alternatives firms tapped public markets in Europe for cash in the third quarter to fund expansion into new strategies as well as to attract new talent. And as the hunt for illiquidity premiums by investors is set to continue, sources said executives are realizing they need to invest in distribution and technology to keep up with the demand from institutional, wealth and retail clients.
Firms that recently listed some of their shares:
- Goldman Sachs Group Inc.'s business Petershill Partners PLC, which takes stakes in alternatives managers, launched its IPO on Sept. 28 on the London Stock Exchange, raising £1.2 billion ($1.6 billion).
- Infrastructure investment firm Antin Infrastructure Partners offered its shares at Euronext Paris on Sept. 24, raising €550 million ($645 million).
- Private equity firm Bridgepoint Group PLC listed July 21 on the London Stock Exchange, raising £907 million.
And the trend is not unique to Europe as U.S. private markets firm P10 Inc. also filed for an IPO on Sept. 27 at the New York Stock Exchange and is seeking $100 million.
Sources said midsize private managers with less than $50 billion in assets under management and looking to expand could struggle to find buyers among traditional money managers with a focus on listed securities so as to "not get stuck in the middle" and compete with firms such as Blackstone Inc., The Carlyle Group and KKR & Co. Inc.
"It's a combination of the need for the capital and the fact that public markets are attractive that's driving a lot of consideration for an IPO," said Benjamin F. Phillips, principal and investment management chief strategist at Casey Quirk, a practice of Deloitte Consulting LLP in Stamford, Conn., in a telephone interview.
Executives of firms that launched IPOs in the past few months said they were looking to expand their offering to include new strategies and considered the IPO the best way to pay for it.
"We believe an IPO would strengthen our balance sheet to accelerate our growth," said Mark Crosbie and Alain Rauscher, co-founders and managing partners of Antin, in a statement on the firm's website when the IPO was announced.
Antin, which had €19.9 billion in assets under management as of June 30 and floated 15% of its shares, is planning to use the IPO proceeds to fund expansion into new strategies, fund future growth plans and to retain talent, said Sebastien Lecaudey, Paris-based senior partner-investor relations and a member of the investment committee at the firm, in an emailed comment. Antin declined to specify the types of strategies it is considering.
Mr. Lecaudey added that Antin considered different options to ensure "long-term continuity and success, while maintaining its independence and unique culture."
"Over the years, Antin received a number of proposals from other investment firms and diversified asset managers to acquire majority or minority stakes in the company, which were turned down for various reasons," he said. "After careful consideration, we believe the unique attributes of an IPO represented a measured solution that best positions Antin for long-term continuity and success."