Following Kohlberg Kravis Roberts’ IPO in Europe, a middle-market private equity shop raised more than $200 million for a buyout fund through a public offering on Nasdaq last Thursday. The Compass Group sold 13.5 million shares in Compass Diversified Trust at $15 each. The move is seen as potentially paving the way for more deals, in which issuers skip the long process of raising a buyout fund directly from institutional investors.
Middle market buyout firms and hedge funds are keeping an eye on the trust, much as mega-buyout shops have tracked KKR’s shares after its $5 billion initial public offering on the Euronext. But there are only a handful of mega buyout funds. There are hundreds of middle market firms.
“This could give firms like us direct access to a continuous supply of capital,” said an executive at a rival buyout shop who is investigating a similar offering. “No more fundraising.”
The trust differs from special purpose acquisition companies, or SPACs. A SPAC starts off without any business operations, raises money to acquire a single company in an IPO then puts most of it in escrow. Shareholders must vote to approve the acquisition. And if a suitable acquisition isn’t found within a certain amount of time--often 18 months--the money is returned to investors.
Calls to Jim Bottiglieri, cfo of Compass, and officials at Ferris Baker Watts, the lead underwriter, were not returned. The shares were trading at $15.08 on Friday morning as CFW went to press.