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Private Equity Enjoys Mini IPO Boom, With Most Sales Or Launches Since 2007

Posted: 04/16/2012 4:46 pm Updated: 04/16/2012 5:54 pm

The boom times are back, sort of, for private equity, but don't break out the champagne just yet.

More companies backed by private equity went public or were sold in the first quarter of this year than in any first quarter since 2007, according to data from the private equity research company PitchBook Data, as CNN Money reported. During the first quarter of this year, private equity firms either sold or took public 112 companies, bringing in roughly $21 billion. That represents a 17 percent increase from the first quarter of last year, when 96 private equity-backed companies were sold or issued shares to the public, according to PitchBook.

"A lot of things are gradually improving," John Gabbert, founder and CEO of PitchBook, told The Huffington Post.

While this marks the best first quarter for private-equity firms selling their stakes since 2007 -- a big year for private equity deals -- it's too early to say if the market is back to full health. To put the latest results in perspective, private-equity firms sold or took public a total of 510 companies during all of 2007.

Kathy Smith, a principal at Renaissance Capital, an institutional research and asset management company focusing on IPOs, said, "2012 looks like a good year to me."

But, "the markets are still volatile; we’re not really out of the woods with all of this panic,"added Smith, referring to the stock markets. "And when you get panic, you get a shutdown of the IPO market."

Last week, California solar power developer BrightSource Energy announced that it was withdrawing its IPO, citing poor market conditions.

Meanwhile some large-scale private equity firms have been taking themselves public as well, with lackluster results.

Last week, the IPO of private equity firm Oak Tree Capital Group proved lackluster when the firm raised 27 percent less than the amount expected after the shares premiered.

On Monday, the Caryle Group announced plans to make 10 percent of its firm available for public trading. The firm's valuation would be just slightly more than $7 billion, a fairly cautious estimate, ranking it below rivals Blackstone and KKR, according to Bloomberg.

Contributing to the recent boom might be the plum tax benefits that private equity firms enjoy when they spin off a company, as CNNMoney noted. Revenues from the sale of a company owned by a private equity firm are currently taxed at the 15 percent capital gains rate, which matches the rate that partners of private equity firms personally pay on the profits from their deals. (This compares with the top tax rate on income of 35 percent, as CNNMoney pointed out.)

Venture capital-backed IPOs are off to a good start this year as well. Twenty U.S.-based venture capital-funded companies went public in the first quarter, raising a total of $1.4 billion. That makes it the most active period since the fourth quarter of 2007, which had 27 VC-backed IPOs raising $2.1 billion, according to data from Dow Jones VentureSource.

Yet, in spite of the massive, well-publicized $1 billion acquisition of VC-backed Instagram by Facebook last week, the market for venture capital-backed acquisitions -- that is, one company buying another company financed by VC funding -- is down, according to VentureSource. Ninety-four VC-backed companies were acquired in the first quarter (raising 18.1 billion) -- a 32 percent decrease from the same period last year.

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