Exits Ease Up In First Quarter

The latest period’s M&A exit count through March 24 totaled 86, which is slightly less than the total from the third quarter of 2010, during the heart of the financial crisis (88). It pales in comparison to any quarter of 2012. The slowest period last year was the second quarter with 109.

Thomson Reuters, the publisher of Buyouts magazine, counted only 26 as having disclosed valuation in the latest period. These transactions combined to reach $6.9 billion. This tally is small compared with how the past few years have started. There were 133 M&A exits during the comparable quarter in 2012 and those with known financial terms combined for $15.3 billion. The latest period appears not unlike the environment of the first quarter of 2010, when 85 transactions closed and disclosed deal volume totaled about $4.8 billion.

Largest M&A Exits

The first quarter saw just three M&A exits with known valuations that exceeded $1 billion. The period’s top deal involved an exit by Bain Capital. The Boston-based shop and Clessidra Sgr SpA sold Cerved Group SpA to European buyout shop CVC Capital Partners Ltd. for €1.13 billion ($1.49 billion). CVC Capital bought a 97 percent interest in the Milan-based provider of online information solution services.

Oaktree Capital Management LP was a party in the period’s second ranked deal. It received $1.27 billion for selling JSA International Holdings LP, a Los Angeles-based provider of aircraft leasing services, to Mitsubishi UFJ Lease & Finance Co. Ltd.

Aurora Capital Group took part in the third largest M&A exit. The deal centered on NuCO2 Inc. Aurora Capital sold the maker and wholesaler of industrial inorganic products to Praxair Inc. The deal has a value of $1.1 billion.

Each of the top three M&A exits focused in on different industry segments. Cerved Group is in high technology. JSA International is in industrials, while NuCO2 is in materials. An industry breakdown indicated five segments have market shares north of 10 percent. Industrials edged out media and entertainment at 16.3 percent versus 14.0 percent. Health care and high technology tied with 12.8 percent a piece, followed by consumer products and services at 11.6 percent.

Four firms participated in at least three M&A exits. Carlyle Group LP led with six exits, followed by Blackstone Group LP with four. KKR& Co. LP and Warburg Pincus LLC each had three.

Setting Sail

There have been at least eight companies with U.S.-based financial sponsors that have gone public so far this year. All but one is trading above its initial IPO price and the industry breakdown is diversified. A couple of the businesses are in the industrials sector, including NCL Corp., and two more are in real estate. The rest were from the financials; high technology; energy and power; and consumer products and services arenas.

NCL completed its IPO in January. The Miami-based cruise line operator sold 23.5 million shares for $19 each, which is above the intended $16-to-$18 a share range. Apollo Management LP and TPG Capital LP are sponsors of NCL, which is more commonly known as Norwegian Cruise Line. The buyout shops bought a stake in the business back in 2008 for $1 billion. Apollo picked up a 37.5 percent interest, while TPG acquired a 12.5 percent stake.

NCL registered the largest post offer value ($3.9 billion) among the portfolio companies that went public this year. It was also one of the first portfolio companies to go public. NCL’s shares changes hands on the Nasdaq under the “NCLH” ticker. It ended March 22 priced at $30.18, which represents a 58.8 percent increase since going public.

Hellman & Friedman LLC’s Artisan Partners LP had the second highest post-offer value and IPO size at $2.1 billion and $331.6 million, respectively. The initial plan was to raise up to $250 million.

The San Francisco shop invested in the Milwaukee-based investment management firm in 2006 through its fifth fund. In March, Artisan sold 11.1 million shares for $30 apiece. The IPO price settled above the anticipated range of $27 to $29 a share. Artisan’s stock trades on the New York Stock Exchange under the symbol “APAM”. At the close of March 22, it was priced at $37.87, about 22.8 percent above its IPO price.

Boise Cascade Co. went public in February and raised $247.1 million through the sale of 11.8 million shares at $21 each on the NYSE. The business is backed by Madison Dearborn Partners LLC and Citicorp Venture Capital Ltd. The offering generated a post offer value of $907.8 million for the Idaho-based maker of lumber and plywood.

The IPO price range was actually raised to between $18 and $20 a share from a prior forecast of $16 to $18 a share. At the time of its IPO, Reuters News reported that Boise Cascade capitalized on investor enthusiasm for a recovery in the U.S. housing market. Shares of the company trade under the “BCC” ticker. Boise Cascade’s stock ended March 22 at $32.90, which represents a 56.7 percent climb from the IPO price.

Only one of the LBO-sponsored businesses that went public this year trades below its IPO price. West Corp. is bucking the trend. The stock closed its first day trading (March 22) on Nasdaq at $18.86, which is 5.7 percent below the $20 IPO price. The Omaha, Neb.-based provider of phone-conferencing services is backed by Putnam Management, Quadrangle Group LLC and Thomas H. Lee Partners. West Corp raised $425.5 million by selling 21.3 million shares.

The generally positive reception of buyout-backed IPOs is a sign of the public equity markets’ strength. This should invite more portfolio companies to pursue their plans to exit investments by pursuing IPOs or exits through M&As.