Week in Review: IPOs, Hot Potatoes, and the End of a Dream

There was a lot of talk about exits this week. While private equity’s game of “hot potato” seems to be going strong, the IPO market seems sluggish. HD Supply, CDW, and Tremor Video went public this week — each at prices lower than expected. The lackluster performances raise questions around the viability of IPO-ing as an exit route, and whether or not the JOBS Act has any chance of revitalizing the strategy. Despite the weakness of the IPO, Neiman Marcus announced its plan to go public earlier this week.

In other news, Texas, California, and Colorado are top states for PE investments, Snapchat is valued at $800M, and a Vimeo founder believes you should never sell your company.

Storm Clouds Ahead for PE-Backed IPOs: Were the ho-hum IPOs of HD Supply and CDW indicative of the entire IPO market, or only those backed by PE firms? Dan Primack argues that HDS and CDW may have experienced greater difficulties because investors are worried about PE-backed companies being able to refinance if tapering begins soon.

Private Equity Finding Exits Easier Than Buyouts: While IPOs may be flailing, exits still seem to be in fairly good standing — just take Blackstone’s recent sale of Vanguard to Tenet for $1.7B. Finding ways to deploy dry powder has proven more difficult, possibly because of mistrust for valuation numbers.

Big Acquisitions Can Fall Apart Over Tiny Details: Culture is a critical part of any successful deal integration — especially in cross-border deals. Just look at Alphahealth’s failed acquisition of Pharmateam. Despite the clear synergies, the integration experienced significant hurdles because of required business attire. Do your employees wear ties?

Why We Keep Coming Back For Mergers Even Though They Don’t Work: Although M&A activity seems to heat up in the summer months — and optimistic forecasts for a stronger 2H 2013 — Peter J. Clarke argues that most mergers still “fail.” So then why do we keep trying them?

Vimeo Founder Says Never Sell Your Company: Vimeo founder Jake Lodwick has previously said that “An acquisition is the end of a dream.” But, that is a bit narrow-minded. An acquisition can afford a company new innovation, new leadership, and new capital. Is that really so bad?

Did you hear?

• 1H 2013 Private Capital Markets Update
• Neiman Marcus Goes Public
• Axial CEO Peter Lehrman was on Bloomberg TV last Friday
• Snapchat is valued at $800M — and may have a liquidity trap
• The Top 10 Lies of Entrepreneurs and Investors
• The Perks of Being an Analyst
• Texas, California, Colorado are Top States for PE Investments
• How Will Private Equity Change in the Next Decade?
• Private Equity Groups Suffer from Lack of Fresh Deals
• Baby on Board? Risks of Inexperience in LBO Lending

Member Spotlight

For Rail Fence Capital’s Principal, Rob Lemos, finding and maintaining a legacy is the name of the game.

“I firmly believe profitability and stewardship are not mutually exclusive,” explained Lemos. “As a manager at United Technologies, a salesman at a small business, and MBA graduate of MIT, I have come to believe that great businesses find a way to excel at both.”

Rail Fence Capital’s mission is to buy one private company and fulfill its potential for profitability and goodwill. Rob seeks to work with owners and intermediaries who share his vision. The firm is primarily looking for services companies with annual revenues of $5 to $50 million and cash flows above $1.5 million.

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