Exit Opportunities Proliferate

The 27 M&A transactions with known financial details (through March 25) had an aggregate value of $13.8 billion. The total is higher than the year-ago sum of $12.1 billion even though the first quarter of 2011 included more transactions. There were 100 M&A exits in the comparable quarter a year earlier, according to Buyouts publisher Thomson Reuters.

Dallas, Texas-based Lone Star Funds was involved in the period’s largest M&A exit when it sold 329 million shares in Korea Exchange Bank to Hana Financial Group Inc. Lone Star received $3.48 billion for selling the 51 percent interest in the Seoul-based commercial bank in early February.

The Korea Exchange exit was one of three with rank values north of the $1 billion mark. Carlyle Group LLC, Crestview Partners LP, and MidOcean Partners LP exited their investment in Insight Communications Co. Inc. at the end of February. Time Warner Cable Inc. acquired the New York-based provider of cable television services for $3 billion in cash.

Providence Equity Partners LLC and Warburg Pincus LLC rounded out the period’s third largest exit. Telefonaktiebolaget LM Ericsson of Sweden acquired Telcordia Technologies Inc., a Piscataway, N.J.-based developer of telecommunications software, for $1.15 billion.

Three firms had least three M&A exits during the first quarter of 2012. Sun Capital Partners Inc. led the pack with four. A couple of the Boca Raton, Fla.-based shop’s exits include the sale of Del Monte Canada Inc. to ConAgra Foods Inc. and the sale of ThermaSys Corp. to Wellspring Capital Management LLC. Del Monte Canada produces packaged fruits, snacks and vegetables. ThermaSys makes and wholesales exchangers and components.

Audax Group LP and Bain Capital LLC had three transactions each. There were nine other firms with at least two M&A exits.

The industrials sector was the most active for sponsor-backed exits with 17 representatives on the list. High technology ranked second with 13 transactions, followed by the materials group with 10. The two industrials deals with known financial terms combined for $830 million. The seven high technology deals with reported terms had an aggregate value of $1.8 billion led by the Telcordia Technologies Inc. transaction. The half dozen deals in the materials industry combined for $1.4 billion. The top M&A exit from this group involved Carpenter Technology Corp.’s purchase of Latrobe Specialty Metals Inc. from Hicks Equity Partners, a majority-owned unit of Hicks Holdings LLC, and Watermill Group for $557.828 million.

The materials category was one of four industries that represented more than $1 billion in rank value, based on disclosed valuations. The financials sector led the way with slightly less than $4 billion. Media and entertainment was at $3.2 billion followed by high technology and materials at $1.8 billion and $1.4 billion, respectively.

IPO Market Heats Up

The IPO market seems to have warmed after cooling off drastically when S&P cut the United States’s long-term sovereign credit rating to ‘AA+’ from ‘AAA’ in early August. There have been at least 15 portfolio companies that completed IPOs this year through March 28. Based on count alone, the latest quarter is an improvement from the comparable period a year earlier when eight portfolio companies went public. However, the first quarter of 2011 was historic because it contained the three largest sponsor-backed IPOs in the industry’s history, based on how much was raised by the respective offerings.

So far this year, Advent International Corp.-backed Vantiv LLC raised the most ($500 million) through the sale of 29.4 million shares at $17 apiece. The IPO came in at the midpoint of the anticipated per-share range of $16 to $18. Shares of the payment processor trades under the symbol ‘VNTV’ on the New York Stock Exchange. Advent owned 51 percent of Vantiv, which reported the highest post offer value among the portfolio companies that went public during the period. It had a post offer value of about $2.17 billion.

Fortress Investment Group LLC had Nationstar Mortgage LLC in its portfolio before the Lewisville, Texas-based company went public in early March. Shares of the mortgage loan services were priced at $14, which is below what Nationstar was seeking when it filed its IPO plans. It wanted to sell shares for $17 to $19 a share. Shares of Nationstar trade on the NYSE under the symbol ‘NSM.’

Caesars Entertainment Corp. held a “technical IPO” in February when it sold 1.8 million shares (1.4 percent of its total shares outstanding) for $9 a share. The casino operator is backed by Apollo Global Management LLC, Carlyle Group, HarbourVest Partners LLC, Ridgemont Equity Partners and TPG Capital LP. Caesars returned to the public market and its shares now changes hands on Nasdaq under the symbol ‘CZR.’ It was formerly known as Harrah’s Entertainment Inc. until it changes its corporate name in November 2010.  In its return to the public market, Caesars raised about $16.3 million and had a post offer value of about $1.13 billion.

Looking ahead, more portfolio companies will likely test the IPO market. Michaels Stores Inc. might be one of them. Reuters News reported on March 26 that Blackstone Group LP and Bain Capital plans to take the owner and operator of arts and crafts stores public, citing four people familiar with the matter. The two buyout shops jointly own 93 percent of Michaels Stores, which was added to their portfolios nearly six years ago for more than $6 billion.