IPOS Private Equity Seeks IPO Exits As Markets Improve, List of Firms Swells; Orbitz Joins Crowd By YVONNE BALL May 14, 2007; Page C5 Call it a byproduct of the buyout boom: A growing number of companies owned by private-equity firms are preparing to go public as their owners tap into a strengthening market for initial public offerings. After a heady few years of deal making, a record number of buyout firms cashed out of their investments in 2005 and 2006. An attractive IPO market so far this year is enticing others to follow suit. Of the 69 companies that have gone public this year in the U.S., excluding real-estate investment trusts and special-purpose acquisition companies, 23 were sponsored by private-equity firms, according to data tracker Dealogic. Together, they raised $6.6 billion, more than one-third of the $15.4 billion raised in total. The number of private-equity-backed IPOs is set to climb in coming months, based on the backlog of offerings filed with the Securities and Exchange Commission. Of the 122 IPOs waiting in the wings, 49 are companies owned by private-equity firms. Together, they hope to raise $9.25 billion. Joining the list just last week was online travel company Orbitz Worldwide Inc. Private-equity firm Blackstone Group -- which is preparing its own IPO -- unveiled plans to take Orbitz public less than a year after it added the firm to its portfolio of companies through its $4.3 billion acquisition of Travelport. The deal could raise as much as $750 million based on Orbitz's preliminary prospectus. The frenetic pace of private-equity firms exiting from their investments is unlikely to ease, given expectations of a stronger IPO market this year compared with 2006. "The IPO market is a much more viable exit for [private-equity firms] today than it was only a short time ago," says Scott Gehsmann, a partner at PWC Transaction Services Capital Markets. "The IPO market has improved immensely since Thanksgiving." To be sure, the overall IPO market is strong even without the private-equity cashout. Mr. Gehsmann says financial sponsors, which also include venture-capital and other funds, drove the increase in IPO activity last year, but that is unlikely to be the case in 2007. "We expect the volume in 2007 in terms of overall IPO activity to be higher than 2006 but don't believe the increase will be driven solely by financial-sponsor-backed IPOs," he says. "We will see more nonfinancial sponsored-backed IPOs coming to the market as well. It is another signal that the IPO market is as healthy as it has been this decade." Jay Ritter, a finance professor at the University of Florida who specializes in IPO research, says that as long as the broader stock market doesn't go through a sustained decline, there is no reason to expect the number of private-equity-backed IPOs to decline. "In 2005 and 2006, 40% to 45% of IPOs were buyout-backed," Mr. Ritter says. "If anything, I would expect the fraction to increase in the next few years because of the huge amount of money that has gone into buyout funds." Mr. Ritter also noted that private-equity-backed IPOs historically have outperformed the broader market. While there is no guarantee that will continue, Mr. Ritter says that on average they have been among the best-performing IPOs.
Of the 69 companies that have gone public this year in the U.S., excluding real-estate investment trusts and special-purpose acquisition companies, 23 were sponsored by private-equity firms, according to data tracker Dealogic. Together, they raised $6.6 billion, more than one-third of the $15.4 billion raised in total.