Deals

Rubenstein: major buyout firms pondering IPOs

Carlyle co-founder David Rubenstein has predicted more IPOs for private equity firms as they grow and their founders age, while Apollo founder Leon Black has acknowledged that his firm and virtually all others are considering public offerings.

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The Blackstone Group and Fortress Investment Group will not be the only private equity firms to go public, founders of rival buyout shops said.

David Rubenstein, The Carlyle Group’s co-founder, and Leon Black, Apollo Management’s founder, said all major private equity firms have been examining the prospect of going public in the wake of Fortress’ successful float and Blackstone’s recent $4-billion IPO.

The two spoke as panelists Tuesday at the Milken Institute’s 10th annual Global Conference in Los Angeles. Texas Pacific Group founder David Bonderman and Thomas Lee, founder of Lee Equity Partners and Thomas H. Lee, also participated in the same private equity-focused session.

Rubenstein

Rubenstein said that firms wanting to remain competitive and grow will have to go public in order to retain and attract employees, the Financial Times reported.

“I wouldn’t be surprised if all the major firms were public four or five years from now,” Rubenstein said.

Part of that has to do with the passing of the torch from firms’ founders to the next generation, he said. “The founders of all these firms are in their mid-50s, late-50s or early 60s. And they probably want to take some money off the table before they are unable to do so.”

Black acknowledged that Apollo is “looking at” a public offering “as is every other private-equity fund”, Bloomberg said. Apollo is also reportedly considering a private placement, which could preface a public offering.

This would not be the first time Apollo has followed one of its rivals to raise additional capital through the public markets. Last July, it became the second firm – after Kohlberg Kravis Roberts – to float a buyout fund on Amsterdam’s Euronext exchange. (Shares in the vehicle recently rebounded to the $20 issue price, though they had been mostly trading at a discount since the listing.)

Buyout firms, Black said, must weigh a potential IPO’s pluses – such as greater access to capital – against minuses, like complying with the US’ Sarbanes-Oxley Act and dealing with shareholder scrutiny.

“When you go public, clients don’t feel you lost their money but that you stole their money,” Black said. “Who needs that?”

Bonderman reportedly said: “All of us are in private equity because we want to be private.”