It was tough sledding last year for LBO firms looking to exit investments. Both the number of M&A exits and IPOs that came to fruition fell dramatically from the prior year, reflecting the difficult economic environment that many have described as the worst financial crisis since the Great Depression.
Thomson Reuters, publisher of Buyouts, tracked 239 M&A exits through Dec. 15, 2008 by U.S. buyout firms, down from 442 a year earlier. The 75 deals with disclosed financial terms had a total value of about $37.6 billion. The previous year’s disclosed value tally was $117.4 billion.
Part of the drop in volume can be explained by a decline in the number of deals with disclosed financial terms. It can also be explained by the size of the most recent year’s transactions. Buyouts counted only seven M&A exits with a valuation of at least $1 billion in 2008, down from 34 a year earlier.
The largest M&A exit of 2008 with a disclosed value was the sale of a 76 percent stake in Intelsat Ltd. to
According to a source close to Madison Dearborn, the Intelsat exit helped the firm distribute a total of $1.8 billion in 2008, including dividends, a recapitalization and tax distributions. The firm distributed $1.6 billion to its limited partners in 2007.
Thirty-five firms accounted for more than half of the exits (123 of 239). The other firms with at least five M&A exits including partial exits during 2008 were:
Through Dec. 15, 2008, buyout firms found only six opportunities to exit investments by going public, a sharp drop from the 38 companies with LBO sponsors that completed an IPO in 2007. In fact, not a single IPO, sponsor-backed or otherwise, took place from late July through Nov. 20, 2008, when Grand Canyon Education Inc. came to market, pricing its IPO at $12 a share. The Phoenix, Ariz.-based operator of an online university, which is backed by
GT Solar International Inc.’s IPO on July 25, 2008, had the highest post-offer value, roughly $2.4 billion at the time of its public offering. The
Based on the closing price on Dec. 12, 2008, GT Solar’s total return since going public is negative 82 percent. Most of the other portfolio companies have also seen their stock prices fare poorly.