PE-backed IPOs outperform the field – AVCAL study

An analysis of all offerings valued $100 million or above over a seven-year period found that those supported by private equity outperformed the field at all points up to three years after listing. Average returns ranged from 4% to 78% for PE-backed IPOs compared to -2% to 4% for non-PE backed IPOs.

Furthermore, the average share price of PE-backed stocks rose by 1.78x over the three years subsequent to listing compared to 0.98x for non-PE backed stocks.

During the period of AVCAL's study, from October 23, 2003 to November 8, 2010, there were 14 IPOs with private equity involvement and 88 without. Various weighting, index and sector-matching measures were employed to eliminate potential distortions by a minority of extreme performers.

Katherine Woodthorpe, CEO of AVCAL, said that the study refutes "a misguided view in some quarters that private equity investment doesn't have a long-term benefit to investors beyond the PE ownership period."

She added that companies cited rigorous strategic oversight and governance, speed of decision making and the freedom for senior management to concentrate on operational performance as some of the key benefits of PE ownership.

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