January 23, 2023

Private Equity Exits: Be Ready for the IPO Window to Open

Last year was a pretty dismal one for IPOs, and I haven’t seen many predictions saying that 2023 will be a banner year for going public either.  That being said, the IPO window can open and close quickly, and this Weil memo explains that PE-backed companies need to be prepared to take advantage of IPO opportunities when they arise:

In 2022, many portfolio companies delayed their IPOs and will look to either go public or be acquired in 2023 or 2024 as markets improve. While many sponsors will exit their investment through a sale to a strategic buyer or another PE firm, there may be periods in the next year or two in which it is more advantageous to complete an IPO rather than an M&A deal. These market “windows” do not stay open forever, so it is critical for portfolio company management to be ready in the event an IPO is the desired path.

In addition, many portfolio companies pursue a “dual track” process and consider both an IPO and a strategic sale at the same time to create price tension on the overall exit transaction. To maximize the pricing leverage from this process, the portfolio company needs to be ready to consummate an IPO if it is determined that the IPO route will generate the most value.

The memo goes on to review the key matters that portfolio companies can address now in order to keep the IPO option open and move quickly to market if the window opens.

John Jenkins