Switching over to a C-Corp was a smart move for public private equity firms.
The Big 5 of public PE — Blackstone, KKR, Apollo Global Management, Carlyle Group and Ares — have seen their shares surge since they changed their corporate structures to a C-Corp from partnerships, PitchBook said in a report. In fact, the stock for four of the five has shot up 60 percent through Q3, according to “Unpacking PE Firm Valuations.” KKR, the laggard, is still up 40 percent, the report said.
The jump in valuation is changing the calculus for major PE firms that, before the switch, had often complained about their slumping stock price. The improvement has caused some firms to change their strategy, which PitchBook thinks could challenge the market for GP stakes. Most notably, EQT opted to go public instead of selling a minority stake to outside investors.
Will other firms follow in going the IPO route? PitchBook thinks they won’t for now. The data company pointed to BC Partners, which sold a minority stake to Blackstone earlier this year. With the deal, BC Partners was valued at $5.6 billion. Blackstone, meanwhile, is valued at around $60 billion, or just one-tenth of its roughly $550 billion in AUM, Pitchbook said.
“Although BC Partners likely offers more growth opportunity than Blackstone and has a higher proportion of its AUM in higher-fee, commingled vehicles, it achieved approximately twice the valuation multiple,” the report said.
PitchBook thinks PE firms will hold off going IPO until they can achieve private market valuations and trade at a premium to compensate for the stresses of being public. Hubsters, do you agree? If so, why? Email me at firstname.lastname@example.org
There’s been a lot of talk about how artificial intelligence will wipe out whole sectors of jobs. Carmela Mendoza, of PEI, is reporting that AI might give GPs better insights but execs may not be all that comfortable with machines having a say in decisions.
UPDATE: The enterprise value of FFL‘s buy of CPI is $910 mln. The headline has been changed