Mendoza School of Business

Buyout Firms Offering LBOs to Flood U.S. IPO Market

Published: January 3, 2011 / Author: Michael Spears

The following is an excerpt from an article in Bloomberg which quotes finance professor Tim Loughran about the trend of private equity firms selling their biggest leveraged buyouts.  To read the entire column, visit: Buyout Firms

More than half of the U.S. initial public offerings planned for this year are from private equity firms as KKR & Co., Blackstone Group LP and Carlyle Group try to sell some of their biggest leveraged buyouts.

HCA Holdings Inc., Nielsen Holdings BV, Kinder Morgan Inc. and more than two dozen other companies owned by private equity firms have registered with the Securities and Exchange Commission to sell $14 billion of shares in IPOs, or 53 percent of the amount on file, according to data compiled by Bloomberg. The total is more than double the $6.6 billion raised in 2010, when their initial offerings accounted for 15 percent of sales.

Buyout firms are betting that a rebound in equity values will increase demand for some of the debt-fueled acquisitions completed as credit markets started to freeze four years ago. While the Standard & Poor’s 500 Index has recovered all its losses since the collapse of Lehman Brothers Holdings Inc. in 2008, the funds are now seeking buyers for companies with almost twice the net debt to operating cash flow as the average private equity-backed IPO last year, data compiled by Bloomberg show.


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