Talking Deal Prices: Sponsors strike IPO gold; banker talks up Cvent buyout

Buyout firms and investment bankers avoided initial public offerings during the rocky first weeks of 2016, but they’ve drawn healthy prices in the public markets after the window for stock-market debuts reopened this spring.

With at least eight deals backed by private equity or growth equity firms so far this year, sponsor-backed IPOs comprise a healthy chunk of the roughly 20 U.S. IPOs of all stripes in 2016. (See: Sponsor-backed IPOs from 2016 deliver solid public market prices)

AveXis, Bats Global, SiteOne

Of that crop, the $96 million IPO from gene-therapy specialist AveXis leads the pack with a 72 percent gain.

Sponsors PBM Capital Group and Deerfield Management LP own about $149 million of stock in AveXis, which is developing AVXS-101 to treat spinal muscular atrophy type 1, the leading genetic cause of infant mortality. With the company’s $790 million market cap but no revenue, investors are betting that AveXis’s gene-therapy medicines will succeed.

Bats Global Markets, operator of the third largest U.S. equity market behind Nasdaq and the New York Stock Exchange, has delivered a 34 percent return since it went public in April.

The company drew backing from a large number of Wall Street names including Goldman Sachs. Spectrum Equity Associates and TA Associates also own significant stakes in Bats. Factoring in its market cap of $2.43 billion and a projected annual adjusted Ebitda of $301.6 million, Bats traded in the public market at 8.1x Ebitda on May 18.

In the third slot for year-to-date sponsored IPOs, SiteOne Landscape Supply has delivered a 33 percent return since going public in a strong showing for sponsor Clayton, Dubilier & Rice.

With a market cap of $1.16 billion, the wholesale distributor of landscape supplies trades at about 10.3x its 2015 adjusted Ebitda of $112.6 million. CD&R sold $137 million of common stock in the IPO and still holds 17.8 million shares. Deere & Co, which acquired SiteOne’s predecessor, McGinnis Farms, holds 9.5 million shares.

Among laggards from 2016’s crop of sponsored IPOs is SecureWorks Corp. The spinoff from Dell Inc owners Silver Lake and Denali Holding Inc has fallen 6 percent after going public at $14 a share in April.

With a market cap of $1.1 billion, the cybersecurity specialist’s public- market valuation amounts to about 3.2x revenue. The company posted negative Ebitda of $48 million for the past year, compared with negative $6.1 million in the previous year.

SecureWorks, which was taken private by Dell in 2011, said it would use proceeds from the $112 million IPO for working capital and other purposes. Funds managed by Silver Lake and Denali collectively own 70 million shares of the company after the IPO. 

Vista Equity take-private price for Cvent

Shortly after Vista Equity Partners said in April that it would take Cvent Inc private for $1.65 billion in cash, Morgan Stanley put out a promotional email to its M&A clients about the deal’s strong buyout price.

As the sell-side adviser to Cvent, Morgan Stanley achieved “the highest ever premium (69%) for a cloud software transaction greater than $1 billion,” the bank said in an email that was forwarded from a GP source.

The bank called the sale process “highly competitive” for the cloud-based software company focused on automating the $500 billion-plus event-management industry, the email said.

To reiterate figures from the May 2 Talking Deal Prices column, the deal values Cvent at 44x its estimated 2017 Ebitda of $37.14 million. That’s the headline purchase-price multiple based on estimates in a survey of analysts by Thomson Reuters.

At the time, Vista Equity declined to comment on the price. A source familiar with the firm said Vista has a road map to take Cvent to a 45 percent Ebitda margin. The deal is expected to close by Sept 30.

Action Item: IPO prospectus for AveXis, http://1.usa.gov/1rWHKdl; Bats Global Markets, http://1.usa.gov/252Yi1t; SiteOne Landscape Supply, http://1.usa.gov/1U295AT; SecureWorks Corp, http://1.usa.gov/1U295AT

Photo ©iStock/pupunkkop