Private equity firms appear to be backing away from initial public offerings, as companies in general are finding it tougher these days to go public. Citing figures from Dealogic, The Wall Street Journal reports that private equity firms now account for less than half of all backing for IPOs, from 53% last year to 42%. What’s more, p.e. firms are giving less money in the process, accounting for only 46% of the total compared with 67% in 2005. Part of the decline can be traced to private equity firms delaying IPOs until market conditions improve. “The attractiveness of the IPO market fluctuates over the short term,” Bruce Evans of Summit Partners told The WSJ. “If we think a particular market during a particular quarter for a particular company is unattractive, then we advise that company to avoid the IPO market and wait.” There is another factor: Private equity firms are discovering they can make a nice profit just by selling their portfolio companies to other p.e. firms. There are “advantages of speed and ease of execution of selling in the secondary market, that outweigh backing an IPO, Chrisanne Corbett, who heads p.e. coverage at KPMG Corporate Finance said in an WSJ interview. This is not to say that private equity firms won’t be back backing IPOs; they just may be waiting a little longer to get back into the game.
