With several IPOs set to take place shortly, Ben Phillips, managing director at Putnam Lovell, said 2007’s IPO activity could, at the very least, match last year’s number and possible exceed it. “It’s definitely possible, and there is enough in the works to make a good run at it,” said Mr. Phillips.
For one, Turner Investment Partners Inc., Berwyn, Pa., appears likely to hit the public markets before the end of the year. Turner, which runs roughly $28 billion, filed in September with the Securities and Exchange Commission to go public, and just last week reported it would offer 10.5 million class A shares between $17 and $19 per share.
Also, Record PLC, a U.K.-based currency manager, filed earlier this month to list on the London Stock Exchange. The firm, which manages roughly $55 billion in assets, could also go public before the end of the year.
In addition, private equity behemoth Kohlberg Kravis Roberts & Co., New York, filed with the SEC in July to go public, and is reportedly moving forward with these plans, despite speculation over the summer that executives would withdraw the IPO because of credit-market turmoil.
A dark horse to list before the end of the year, some bankers said, is Julius Baer Holding Ltd.’s New York-based investment management arm. As Pensions & Investments first reported in August, the $60 billion international equity specialist may soon file to go public, as its Zurich-based parent company realigns and restructures its overall business model.
Not a factor
While some larger alternatives firms such as Blackstone Group LP and Fortress Investment Group Inc., both based in New York, have seen their stock prices decline since their debuts earlier this year, bankers said this isn’t a factor in deterring firms from considering a listing. Blackstone has seen its stock dip 35% since its IPO in June, while Fortress’ stock price has fallen roughly 7.9% since listing in February.
Because overall equity market conditions have been generally strong during the last two years, IPOs have become a more viable option for money management firms — both traditional and alternative alike — seeking sources of liquidity.
“Any time the public markets open up like this, owners of businesses that are of relevant size are going to give it (going public) strong consideration,” said Aaron Dorr, managing director at Putnam Lovell. “And once they see that their peers are doing it, it makes it even more feasible.”
Said Darlene DeRemer, partner at Grail Partners LLC, New York, a merchant advisory bank focused on the investment management business: “IPOs are particularly attractive options for firms that are looking for capital and liquidity, but also looking to maintain their independence as well.” Rather than sell to strategic buyers, or consider mergers with other financial institutions, IPOs can allow firms that have historically been run by their founders and principals to maintain their culture as they seek to expand, or address succession issues, added Ms. DeRemer.
In addition to the total number of IPOs approaching record levels, the size of the companies going public has increased as well.
Blackstone, which had a $33.6 billion market cap when it went public earlier this year, is the largest IPO in the industry’s history, according to data from Grail Partners. BlackRock Inc., New York, which went public in 1999, still ranks as the industry’s largest IPO in terms of assets under management; the company managed $143 billion at the time of its IPO, according to Grail, compared with Blackstone’s $98 billion.
Because of the IPOs, there has been more total M&A activity in the money management business through mid-November than there was in all of 2006 — previously the record year for deal making in the industry.
Year to date, there have been 208 transactions globally involving money managers with a total price tag of $46.7 billion, Putnam Lovell reports in preliminary numbers. Last year’s M&A deals totaled 192, with a combined deal value of $44.1 billion.
