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IPOs backed by private-equity firms lag

the context of an overall drop in the sor performance, Apax Partners Nonsponsored issues valuation of European public com- topped Dealogic's rankings be- panies. The FTSE 250 has fallen by tween 2005 and 2008, based on the show better returns, 15% from its July peal< last year to average aftermarket performance April 16 this year. of its IPOs. ranked new data indicate has always main-last for 2005 to 2008. BY CATHERINE Cituc tained that it builds strong busi- There have been no private-eq- nesses to return them to market in uity-backed initial public offerings PUBLIC OFFERINGS in a more robust state. "Private-eq-in Europe so far this year. Several Europe by companies backed by uity funds usually have controlling have been postponed since the end INITIALprivate-equlty firms underper- stakes in firms prior to the IPOs of 2007. formed other IPOs over the past six and continue to keep sizeable The best-performing, private- years, according to research from stakes after the offering," accord- equity-backed IPOs last year were Financial News and data provider ing to a report on IPOs in the U.K. in the commodities sector. Oil-ser- Dealogic. by private-equity firm Terra Firmavices company , backed Private-equity-backed IPOs that was released by Christian von by Candover Investments PLC, and launched since 2002 delivered an Drathen and FlavianoFaleiro, Netherlands-based specialty met- average aftermarket performance Sloan Fellows at the Busi- als company AMG Advanced Metal- of 23% to mid-April, compared with ness School, last December. "There- lurgical Group, backed by the Safe- an average of 28% for IPOs that fore, the long-run stock perform-guard International Fund, were weren't backed by financial spon- ance of their IPOs has a substantial sors. The findings are in sharp con- the best. impact on their funds' perform- This indicates the flight to qual- trast to the same analysis con- ance. More importantly, they tend ducted last June, just before the ity in the equity markets following to be repeat issuers in the equlty the downturn. Both were backed by credit crunch, which showed that markets, may suffer a loss ofreputa- IPOs backed by private equity out- tion if private-equity-backed IPOs Credit Suisse and boosted the aver- performed other flotations. turn out to systematically under- age aftermarket performance ofpri- One expianation could be compa- perform, and, ultimately, get lower vate-equity-backed IPOs with a nies owned by private-equity firms prices for their new issues." 328% and 112% rise in their respec- tend to have more debt on their bal- The report, which tracked the tive share prices. ance sheets, iricreasing their risk in performance of 128 leveraged-buy- "The oil-field services sector is the arid credit environment. "lt's out-backed IPOs against a total of a high-growth sector and Well- not that surprising," said Christian 1,121 non-LBOs, found that when stream listed at a time when inter- Hess, European head of UBS AG's Fi- compared with size and value- est in the sector was particularly nancial Sponsors Group. "Compa- matched benchmarks, LBO-backed high. Since listing, the company nies brought to market by private- IPOs outperformed the market and has operationally continued to per- equity firms probably have slightly non-LBO backed IPOs between form strongly," Mr. Williams said: higher leverage compared to their 1999 and 2006. The worst-performing company sector peers, and leverage is seem- But Dealogic's data showed few also feil into the commodities cate- ingly a bad word at the moment." European listed companies were gory,suggestingsectorplays Another factor is a decline in ap- able to withstand the ravages ofthe weren't always a clear indicator of petite for riskier assets backed by credlt markets last summer with- performance. Warburg Pincus's private equity in the public mar- out some damage to their share ElectroMagnetic GeoServices kets. There have been no IPOs ofEu- price. "Overall, secondary-market ASA, a Norwegian firm that carries ropean companies this year and aperformance inherently impacts high number of canceled or post-where newly listed companies poned sponsor-backed IPOs, ac- trade," said Nick Williams, co-head cording to Dealogic's records. of European equity capital markets For last year as a whole, all com- at Credit Suisse Group, the top panies that listed, whether private- bookrunner for sponsor-backed equity backed or not, registered a IPOs. drop in their share prices. Those Of the 46 private-equity-backed with private-equity backing on av- firms that listed last year, only ulme erage held a steadiercourse stocks were up by April 16, the cut- against the falling market. 0ff point for the analysis run by Dea- The figures should be taken in logic. In terms ofbest long-term spon-

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out seabed logging forthe oii indus- volumes ta continue at current 1ev- try, lost 72% of its initial listing eis for the coming months," Mr. Wil- value. liarns said. "Over the lang lernt tte Sponsors and banks alike re- WO market will continue tobe a via- mained sanguine about future op- Ne exit route far financial spon- portunitiesforprivate-equity sors" backed listings but valuation re- Nic&ette Davey mains an important issue. and Oliver Smiddy «We have started to sec 8 steady contributed to this articic. increase in the new issues calendar in recent weeks amt 1 would expect

A poor showing Luropean IPOs by companies backed by private-equity firms have underperformed those that weren't backed by financial sponsors in each of the past six years.

Nonsponsor Sponsor

250% Mean Mean 200- S Median Median 150-

10o.

rva 0

-50 1 1 1 i 2003 '04 '05 06 '07 '08 2003 '04 '05 '06 '07 '08

NGte: Dealogic's PC analysis Dealogic's figures tra(kS the aftermarket terformsrge of 599 nonpr'vate equitv-backed 129 levoraged -backed IPOs in Europe listed in 2005, 2006. 2007 and 2008. lPOs bad tobe valued at a minimum of $50 million. In each case, the company's performarxe was tracked (rom Its initial listing price to tue currGnt share grice as of April 16 and the chanqo in valuation was etpressed asa percentage. Where data was aggregated to lind the trend across the two categories el sponsor and nonsponsor backed P05, uflean and rnedian figuros Werg provided. Source: Dealogk

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