Private equity firms should prioritise realistic valuations and leave room for growth when listing companies on the stock market, and not look to squeeze every last dollar out of initial public offerings (IPOs) in today’s “buyer’s market”, according to BC Partners.
Speaking in interview, the $40bn alternative investment manager’s Chairman for Europe, said: “We need to ensure we leave some runway and don’t push too hard on valuations at IPO.”
His comments follow the successful debut of BC Partners-backed Springer Nature AG & Co KGaA on the Frankfurt Stock Exchange earlier this month, marking Europe’s first major IPO of the autumn season. The offering attracted demand more than six times the stock available, largely because of the company’s moderate pricing, according to Stathopoulos.
“Part of the reason the Springer Nature IPO was successful is that we were not greedy,” he said. “This is crucial for private equity-backed IPOs, which can sometimes receive mixed responses.”
The deal was priced just above the midpoint of its marketed range, raising €522m for Springer Nature and BC Partners, giving the publisher of the science journal Nature a valuation of €4.5bn – significantly lower than the initial target of €7bn. On the first day of trading, shares rose, and by Monday, they were trading at around €23.83, about 6% above the IPO price.
Stathopoulos expressed confidence that Springer Nature’s current valuation discount, compared to peers like Relx Plc, would close as the company grows. He also hinted that BC Partners could sell additional shares in the future, saying, “If the share price follows, we can do block trades and increase liquidity.”
Due to lower interest rates and stronger stock markets, IPOs are likely to become a more popular exit strategy for buyout firms, especially by 2025, according to Stathopoulos said, ho also noted that for large investments, private equity firms will face a decision between taking companies public or moving them to continuation funds.
“The supply of IPOs will increase, but whether demand does will depend on the quality of the assets,” he added.
