Slowdown in IPO exits is boon for trade sales - AVCJ Forum

"One of challenges that faces our industry now is the exit situation in the public markets over the last two years, the IPO market is difficult" Joe Bae, managing partner of KKR Asia, said during a keynote panel discussion at the AVCJ Forum. "With the controlled buyouts we are doing the most likely exit channel for us frankly will be the strategic sale of those businesses over time."

Citing KKR's recent sale of Singaporean disc drive component maker Unisteel to Switzerland's SFS Group, Bae said deals in which GP has a controlling stake still have a decent path to liquidity. The options are more limited for GPs with minority investments in countries like China and India and holding periods are lengthening.

"If you have a high quality business you will still be able to go public but you may not get an optimal valuation," Bae said. "The companies that will struggle are the really small businesses that are not industry leaders."

On the other hand, the challenging IPO market is facilitating investments as  as growth companies confronted with a scarcity of capital find they have fewer places to go, broadening the opportunities for PE.

"I think the hard truth is that in markets like China we can look back to 2008-2011 and a huge part of the market was pre-IPO, growth stage investments and investments in smaller companies, not necessarily market leaders," said Michael Chae, senior managing director at The Blackstone Group.

"Those deals were based on public market valuations and based on plans to take them public. The world has changed and the game has changed. That has had a profound effect. I think trade sales are an exciting part of the PE business going forward."

 

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• Topics
• Greater China
• Exits
• China
• AVCJ Events
• Exit
• IPO
• Trade sale