US PE-Backed IPOs Slow Down In 3Q

US PE-Backed IPOs

After initially seeking between $21 and $23 per share, materials & chemicals company PQ Group has priced its IPO at $17.50, raising $507.5 million in the process. That’s not the result hoped for by private equity backer CCMP Capital Advisors, which acquired a 49% stake in PQ from The Carlyle Group in the final days of 2014.

PQ’s disappointing public debut comes at the end of a quiet quarter for PE-backed IPOs in the US, according to the PitchBook Platform, an abrupt departure from the first half of 2017, which had seemed to mark a recovery from the doldrums of a little more than a year ago. Here’s a look at the recent quarterly numbers:

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After stateside PE-backed IPO activity fell off a cliff in 1Q 2016, the number of new public offerings either increased or stayed steady four of the next five quarters, rising from one IPO in 1Q 2016 to 14 during 2Q 2017. PQ represents just the fifth such transaction during 3Q.

The other PE-backed companies in the US to debut during 3Q are meeting mixed returns so far. PetIQ, a provider of veterinary medicine previously backed by Eos Partners, has seen its stock climb almost 30% since a July IPO. Stock in Ranger Energy Services, a CSL Capital Management portfolio company, has stayed relatively steady. YogaWorks, an operator of yoga studios backed by Great Hill Partners, has meanwhile seen its market cap decline by nearly 50% since an August offering.

Other forms of PE-backed exit aren't experiencing the same decline in 3Q activity. SBO rates in the US are just about the same as they've been the past two quarters, per PitchBook data. While sales of PE portfolio companies to strategic acquirers dipped slightly during 3Q compared to 2Q, the change isn't nearly as stark as for IPOs.

In recent years, nearly every sharp quarterly decline in PE-backed IPOs in the US has been followed by a steep increase the next quarter. Will the pattern continue? That industry trend will be one of the more interesting to watch during 4Q.

Check out our previous coverage of PE exits.

Article by Kevin Dowd, PitchBook

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