PE-Backed IPOs Continue To Gain Pace

In recent weeks we have been highlighting tentative signs of improvement in the US IPO market, arguing that one of the key factors putting upward pressure on issuance would be a move to market by private equity firms keen to capitalise on buoyant financial markets to exit certain investments. The gains seen in stock markets throughout 2009 have given PE firms a glimmer of hope that they may offload certain portfolio firms to return capital to investors or sell stock to raise equity to deleverage their won balance sheets. This was underlined by US discount retailer and KKR- portfolio firm Dollar General, which recently filed for an IPO in a bid to raise US$750mn. KKR acquired Dollar General at the height of the leveraged buyout (LBO) boom for US$7.2bn in 2007, but of this KKR and its co-investors contributed only US$2.8mn in equity, with the remainder made up with borrowing.

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