Exit Drought: When Have Mega-Fund LPs Last Seen A Distribution?

UPDATED Back in those glorious boom times, buyout firms purchased multi-billion dollar companies on the premise that, after they somehow improved the business, they’d do a big, exciting IPO. That dream is clearly dead for the moment, and gone with it are LP hopes of distributions.

If deal flow begins to pick up and buyout shops begin to spend all that “cash” they’re sitting on, LPs could be in trouble. I put quotes around “cash” because it isn’t exactly in their pockets. It’s a commitment, and with very few exits, the money is flowing one way, making it a commitment LPs aren’t too excited to fulfill.

The last real mega-buyout exit was the $16 billion sale of Intelsat by Apax Partners, Apollo, Madison Dearborn and Permira. That was 14 months ago. Since then, most of the mega-firms have piddled around, selling little things with no disclosed deal value here and there. Meanwhile, four of the firms have experienced an all-out drought for the past year and a quarter.

Below, I’ve taken a closer look at the most recent exits by members of the Private Equity Council, a private equity advocacy organization with the largest buyout firms as its members. They’re listed in order of date.

Note: I realize that these firms all have multiple funds that are in various stages of the 10-year investment cycle. I’m merely using this as a way to gauge just how bad the exit environment has been. Likewise, I realize that some firms distribute portfolio company management fees to LPs, however that amount would be very small in comparison to a mega-buyout exit. My sources on this info are Buyouts magazine research, announcements from the firms, and other public information. If I’ve missed one, please let me know and I’ll update accordingly.

Firm: Carlyle Group
Most Recent Exit: April 22
Carlyle sold SmartTrust to technology group Giesecke & Devrient for an undisclosed price. The firm invested in SmartTrust through Carlyle Europe Venture Partners. A month prior, the firm sold Key Plastics for $135 million to a group of creditors.

Firm: The Blackstone Group
Most Recent Exit: April 20
The firm exited Stiefel Labs, a company it purchased a 19% stake for $500 million in late 2007. Prior to that, the firm’s latest exit was its September 2008 sale of ARR-MAZ Custom Chemicals to Snow Phipps Group LLC.

Firm: Apollo Global Management
Most Recent Exit: April 1
Apollo had a ghost exit with the shareholder approval and merger of Hughes Telematics and Polaris Acquisition Corp., a SPAC. However, in order to get the deal done, Apollo had to defer any payout until the stock hits $20, and that’s after a two-year lockup period. It’s at $4 now, which is why I’m calling it a ghost exit. Prior to that, the firm’s most recent exit was its March 2008 sale of Rexnord SAS to an investor group.

Firm: Apax Partners
Most Recent Exit: March 2, 2009.
Last month, a consortium consisting of Apax Partners, Barclays Capital and R20 sold Somerfield to The Co-Operative Group for £1.565bn. This is the second largest recent exit to speak of. Likewise, the company is poised to earn a return on its 11% stake in Prometheus Laboratories, a VC-backed drug and diagnostics company that is in registration for a $100 million IPO.

Firm: KKR
Most Recent Exit: February 26
KKR sold two European companies, one called billiger.de and one called PagesJaunes Petites Annonces.

Firm: Providence Equity Partners
Date: January 17
The firm sold KFTY – TV50 to High Plains Broadcasting for a whopping $1 million.

Firm: TPG Capital
Most Recent Exit: January 9.
The firm, alongside GS Capital, closed its sale of Alltel to Verizon in Jan. At, $28.1 billion, it’s the largest recent exit to close. Prior to that, the firm sold Silvergate Plastics to AWB Plastics for $2.38 million. A month prior the firm sold Bally International for $600 million.

Firm: Permira
Date: August 8, 2008
The firm agreed to sell its remaining stake in Jet Aviation to General Dynamics for €1.5 billion. The firm recently put its sale of Cognis on hold until the economic crisis passes.

Firm: Madison Dearborn
Most Recent Exit: July 14, 2008
The firm sold Coise Building products to Howarth Timber Engineering. Prior to that, the firm sold four other companies in 2008, as well as Intelsat.

Firm: Hellman & Friedman
Most Recent Exit: March 2008.
Alas, I somehow missed the fact that the firm sold Doubleclick to Google for $3.1 billion in March 2008. For some reason Buyouts didn’t include that in its year-end exit database– I’m guessing its because the deal was announced back in April 2007. It even won Buyouts’ Large Market Deal of the Year award!

Firm: Bain Capital Partners
Most Recent Exit: None in 2008 or Q1 2009.

Firm: Silver Lake
Most Recent Exit: None, unless you count the firm’s $275 million stake sale to CalPERS on January 9, 2008.

Firm: THL Partners
Most recent exit: None in 2008 or Q1 2009.

Photo: A farmer carries pails to transport water from a partially dried-up pond at the outskirts of Yingtan, Jiangxi province February 5, 2009. REUTERS/Stringer (CHINA).