Initial public offerings haven’t exactly been flying off the shelves lately. According to a September study by consulting firm PricewaterhouseCoopers, only 20 companies have gone public during the third quarter of this year, raising a total of a scant $3.1 billion. Yet on September 6, Carlyle Group, the $150 billion-in-assets, Washington, D.C.–based private equity firm, went ahead and filed its S-1 form with the Securities and Exchange Commission, announcing its intent to float public shares on the New York Stock Exchange.
If this climate has been a bad one for IPOs, then it has been a truly dreadful one for publicly traded alternative-investment firms. Take Fortress Investment Group, the first large alternative- investment firm to go public in the U.S. with its January 2007 IPO. Since the start of this year alone, Fortress’s share price has halved in value — it now trades below $3.20 a share.
One likely reason that Carlyle is seeking to go public now is fundraising. In 2008 the firm had inflows, including commitments, of $15.6 billion; for 2010, $3 billion. Although those numbers picked up through the first half of 2011, they are still nowhere near what they were in 2008. By raising public funds, Carlyle can diversify more into other businesses — such as credit — that, unlike private equity, tend to thrive in bear markets.
Over the past four years, Blackstone Group, Kohlberg Kravis Roberts & Co. and Apollo Global Management have all gone public. (Only TPG Capital, the largest private equity fund manager, with $50 billion of investor commitments, remains privately owned.) It was only a matter of time before Carlyle followed. Being publicly traded leaves a firm open to the vagaries of the public market, but it also provides brand identity as well as a lucrative way to cash out. Like many of the founders of the other major private equity players, Carlyle’s three honchos are in their 60s.
Says Eric Weber, managing director of Freeman & Co., a New York–based boutique advisory firm specializing in the financial services sector, “Going public prices the currency, and that can be helpful to building out the business and dealing with long-term succession-planning issues.”
—Imogen Rose-Smith
