Page 2 - IPO Analysis - Private Equity Exits 2017_Final

Private equity exits via Initial

Public Offerings (IPOs) in 2017

Notwithstanding the political and economic uncertainty associated with the Brexit referendum and general election in 2017, the London markets remained an attractive
venue for private equity investors to achieve liquidity. In this report we analyse the key deal terms of private equity exits across both the London Main Market and AIM in
2017. A copy of our 2016 report can be found here.

Private equity investors appear to be increasingly willing to retain an equity stake beyond IPO, recognising Whilst 2017 did not see a mega-IPO in the vein of ConvaTec's £1.45 billion fundraise in 2016, the public
that an IPO represents the next stage in the lifecycle of their investment rather than a complete exit at the markets continue to provide access to much-needed capital with the average deal size of PE-backed IPOs

point of IPO. Private equity investors are retaining a greater proportion of their shareholding with an average being £201.2m and £54.3m for the Main Market and AIM respectively, with the highlight being Eddie Stobart
sell-down of 28.5% on the Main Market and 14.9% on AIM (as compared to 43% and 16.8% respectively in Logistics' fundraise of £383m, the largest AIM IPO since 2015.
2016). This suggests that private equity sellers are becoming increasingly confident that the public markets
The market appetite for a twin-track process is still apparent, coupling an auction process for potential trade
represent an opportunity to derive more value beyond IPO, in many cases we suspect accepting an IPO
and private equity buyers with the preparations for an IPO. The strategy and tactics in such a process are key
discount but anticipating a rise in valuation beyond IPO and expecting the ability to trade out of their
in order to achieve competition and genuine price tension. The investment in time and cost should not be
positions over a period of time.
underestimated – such processes are often a huge drag on senior management time and resource and the
In this scenario, the terms of any controlling shareholder (or relationship) agreement and the lock-in become business can start to suffer if the process becomes protracted.
increasingly important to both the private equity seller and the public markets investors – a balance needs to
Our nationally recognised corporate finance specialists work regularly with private equity investors, venture
be struck. Given private equity sellers' confidence in the London public markets, they are increasingly willing
capitalists, portfolio companies, management teams and investment banks on equity capital markets
to be subject to longer lock-in periods, especially on the Main Market, with a third of Main Market IPOs being
transactions, including IPOs on London's Main Market and AIM. We have continued to expand our London-
subject to 12 month hard lock-ins (none in 2016) and 44% being subject to orderly market arrangements
based private equity team in 2017 welcoming key partner hires Laurence Applegate, Andrew Carpenter and
(12.5% in 2016), a firm indication that private equity sellers expect the London public markets to provide
Mel Sims. We provide sector-specific expertise in complex transactions aimed at maximising your returns
long-term returns.
whilst minimising your risk.
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© DWF LLP 2018 2