Centerbridge, Bridgeport agree to buy CSI; PE feels impacts as IPO windows closes

IPOs are not having a good year.

Morning Hubsters!

How is your summer ending? Have you had some time off yet? Have things slowed down finally? Feels like it, anyway …

Computers: Centerbridge Partners and Bridgeport Partners agreed to buy Computer Services Inc, which provides fintech and regtech services, for about $1.6 billion. CSI shareholders will get $58 per share in cash as part of the deal. The deal is expected to close in the fourth quarter, at which point CSI will become a private company.

The per-share purchase price represents a 53 percent premium to CSI’s closing stock price on Aug. 19, the company said in a statement.

Read more here on PE Hub.

Exits: IPOs are on pace for their worst year in decades, having raised only $5.1 billion so far, according to the WSJ this week, citing data from Dealogic. Typically IPOs would have raised around $33 billion at this point in the year, according to the data that dated back to 1995.

IPO advisors cited in the article aren’t anticipating significant public filings until at least next year. And those companies that seek to go public this year likely will have to cut their valuations from the heights of the past few years. Companies in desperate need of growth capital may also seek if from the private markets, where it can be more expensive, but come without the transparency requirements of the public market.

For private equity, the closure of the IPO window cuts off one of the main exit paths for portfolio companies. With IPO opportunities effectively shut off for now, M&A activity has also slowed. GPs have few options left to sell their companies, save perhaps to a strategic buyer or another PE firm.

As exit activities slow, distributions to LPs also are slowing. With less capital flowing back to LPs, fundraising will continue to slow as the natural cycle of investors recycling proceeds into new funds gets disrupted.

Some secondary market professionals believe that as exit options narrow, GPs will increasingly turn to secondaries to deliver liquidity to LPs and hang on to investments until markets improve. This could mean a busy second half for the secondary market, though hefty deal activity will depend in part on pricing, which has been relatively weak this year amid broader economic uncertainty.

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Correction: An earlier version of this report listed the wrong firm as agreeing to buy CSI alongside Centerbridge. The firm is called Bridgeport Partners. The report has been updated.