The TRUTH Behind PRIVATE EQUITY Money And IPOs

When it comes to going public, companies backed by private equity firms tend to deliver better returns. Research from the Australian Private Equity and Venture Capital Association finds that ‘newly listed shares by PE firms outperformed non-PE-backed listings across all time horizons analysed from one day to three years after IPO listing, with average returns ranging from 4 per cent to 78 per cent across the different time scales, compared to minus 2 per cent to 4 per cent for non-backed IPOs.’

The research looks at the performance of IPOs over the 2003-to-2010 period for companies with values of above $100 mn. Fourteen private equity-backed companies were brought to market during this period: Boart Longyear, Bradken, Dyno Nobel, Emeco Holdings, Hastie Group, Invocare, JB Hi-Fi, Just Group, Kathmandu Holdings, Myer Holdings, Norfolk Group, Pacific Brands, Repco and Seek.

The reason for the improved performance, it seems, is that ‘private equity players bought into businesses and reorganised them in sensible and profitable ways.’

Source: The Australian

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