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There's an old joke that a skateboard is a good investment because you can flip it (some grade-A dad comedy right there), but an even better investment is one where you can list it.
On Monday, Goldman Sachs said it will put its private equity unit, Petershill Partners, on the London Stock Exchange via an IPO at a $5-billion valuation.
The first group of its kind, Petershill was set up in London by Goldman in 2007 to buy minority stakes in private equity, venture capital, and hedge funds — the idea being to profit from the recurring revenue of their management and performance fees.
Petershill now holds positions in 19 asset managers that sport $187 billion in combined assets under management, among them renowned hedge fund Caxton Associates and tech buyout specialist Accel-KKR. PE founders can unload their lucrative claims on those funds when looking to cash out and pick up that ski-in ski-out house in Aspen.
While Goldman is headquartered in New York, it chose to list Petershill in the land of savory pie and potted pork where it was founded. Sentimentality wasn't the deciding factor; London's had an impressive run of IPOs this year, with $12.8 billion raised through the end of July, the most in seven years. And it's provided a good home to private equity listings in particular:
- British PE firm Bridgepoint raised $1.25 billion in a July IPO, and the stock is now trading 45% above its IPO price.
PE buyout deals totaled $354 billion in the first half of 2021, already blowing past 2020's full-year total of $257 billion, according to financial law firm White & Case. "The environment is quite fortuitous for private equity at the moment, especially with rates looking likely to stay lower for longer," Susannah Streeter, an analyst at Hargreaves Lansdown, told Reuters.
Valuation Salvation: Since last year's market sell-off, the five biggest listed U.S. private capital companies have tripled in combined value, with investors eyeing the huge fees they rack up from unlisted assets.