News

First Quarter IPOs Led By Private Equity

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According to PwC, the US IPO market showed significant strength in the first quarter of 2012, resulting in the highest first quarter volume since 2007. The U.S. IPO market continues to attract a diverse range of companies across different industries, according to PwC. The technology, industrial and financial services sectors were the most active during the first quarter, contributing thirteen, nine and nine IPOs, respectively. In terms of value, industrial companies led with $2.1 billion, representing 36 percent of total capital raised in the first quarter of 2012.

Thirty-six of the 44 IPOs in the first quarter of 2012 were backed by financial sponsors which accounted for $4.8 billion of total quarterly proceeds. Financial sponsor-backed companies represented 82 percent of the total volume and 83 percent of the total value of IPO activity in the first quarter. This is in line with the first quarter of 2011 when financial sponsor-backed IPOs represented 70 percent of the total volume and 86 percent of the total value.

“Financial sponsors continue to play a major role in IPO market activity, as they seek to fully monetize key portfolio investments in an improving climate for the capital markets, particularly in the technology sector where all the technology IPOs in this quarter were backed by financial sponsors,” said Henri Leveque, leader of PwC’s U.S. Capital Markets and Accounting Advisory Services. “As the year unfolds, we expect the IPO pipeline to continue to reflect a high proportion of financial sponsored companies as private equity and venture capital firms seek to raise capital, build liquidity and pursue new acquisition opportunities globally.”

Average post-IPO returns for offerings that priced from January 1, 2011 to March 31, 2012, entered into positive territory, ending the first quarter up an average of 13 percent from IPO price, reversing losses at the end of 2011. This positive reception by the investor marketplace demonstrates improved optimism about new issuers with sound fundamentals and a solid growth plan, according to IPO Watch, a quarterly and annual survey of IPOs listed on U.S. stock exchanges by PwC’s Transaction Services practice.

The current IPO pipeline (companies that have filed for an IPO in the last twelve months but not yet priced) remains high at 157 companies, representing a slight decline of 8 percent from year end 2011. The IPO pipeline is led by three industries contributing 60 percent of total pipeline volume, which includes the technology (24 percent), industrial (18 percent) and financial services (18 percent) sectors.

“Continuing on the increase in IPO activity in the fourth quarter, we saw strong first quarter IPO volume and filing activity, which coupled with the increased investor interest in IPOs, bodes well for the year ahead,” said Mr. Leveque. “The IPO pipeline remains healthy with a diverse range of companies exploring public launches, with notable strength in the technology, industrial and financial services sectors. Major IPO activity from some of the larger well-known technology players, including Facebook, will likely lend support to a host of smaller technology companies looking to enter the public markets.”

Private Equity Fund-Raising Climbs 4% in First Quarter

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A new report from Dow Jones shows that in the first quarter, U.S. and European private equity funds held more closings and raised more capital than in the same period last year, but more than half the capital raised in each region went to a small contingent of firms.

U.S. private equity funds raised $38.1 billion for 136 funds, a 4% increase in capital raised and 5% increase in fund closings from the first quarter of 2011. In Europe, private equity fund-raising spiked to $22.3 billion raised for 43 funds, an 82% increase in capital and 10% increase in fund closings. The 11 largest U.S. fund closings and the three largest European closings accounted for more than half of the total capital raised in each region.

“U.S. fund-raising may not be off to a roaring start, but it’s also not stalled in the driveway,” said Laura Kreutzer, managing editor of Dow Jones Private Equity Analyst. “Private equity firms have been actively focused on returning capital to their investors, which has helped some of them attract capital to new funds. Firms have learned that you must give in order to receive.”

In the U.S., 63 buyout and corporate finance funds raised $21.9 billion, a 7% increase in fund closings but a 6% decline in capital from the year-ago period. The drop in capital committed was kept to a minimum thanks to strong interest in the diversified private equity sector within buyouts, which raised $5.9 billion for 15 funds, up from $234 million raised by six funds during the same period a year ago.

In Europe, buyout and corporate finance funds drove the region’s overall increase in fund-raising by raising $18.4 billion through 22 closings, a 68% increase in capital collected for two fewer funds compared to the year-ago period. Similar to the U.S., diversified private equity funds saw dramatic gains in Europe, raising $8.5 billion for four funds, up from $132 million raised for two funds a year ago.

New York Life Capital Partners Closes Third Mezzanine Fund

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New York Life Capital Partners has held a final closing of its third mezzanine fund, NYLCAP Mezzanine Partners III, on March 30, 2012, with total commitments of $980 million, more than a 20 percent increase than its predecessor fund. “We are very grateful for the show of support we received from investors and are confident that our strategy of investing in the middle market, with longstanding sponsor relationships, will continue to deliver strong results” said Thomas Haubenstricker, CEO of New York Life Capital Partners.

The new fund will continue NYLCAP’s strategy of partnering with private equity groups by providing mezzanine financing to support their acquisition of middle market companies in the U.S. and Western Europe. To date, the fund has invested $235 million in 10 portfolio companies.

Investors in the new fund include public and private pension funds, financial institutions, insurance companies, family offices, select individuals and sovereign pools of capital. “Historically, investors in this asset class have been large financial institutions and insurance companies, however in this fundraising effort, we have seen an increased interest among new types of investors seeking attractive yields and consistent downside protection,” said Mr. Haubenstricker.

New York Life Capital Partners manages $8 billion of private equity assets, including direct equity, direct mezzanine, and limited partnership investments. New York Life Capital Partners raised its first mezzanine fund in 2002, and the existing team has invested $1.9 billion in 90 mezzanine transactions. As an affiliate of New York Life Investments, NYLCAP manages alternative assets for New York Life Insurance Company, its affiliates and other institutional investors. NYLCAP, together with its predecessor organizations, began investing in private equity partnerships in 1984 and has been an active, direct private equity investor since 1991. The firm is based in New York, NY (www.nylim.com).

New Private Equity Firm Launched in New York

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AUA Private Equity Partners has been launched in New York as an operationally-focused, lower middle-market private equity firm. The new firm is led by Andy Unanue, former COO and current shareholder of Goya Foods. Mr. Unanue is partnering with the former principals of Gotham Private Equity Partners, who have integrated their operations into AUA Equity. Joining Mr. Unanue as founding partners in AUA Equity are Steven Flyer, David Benyaminy and Kyce Chihi.

AUA Private Equity Partners makes equity investments in companies in the consumer, media and business services sectors with a particular focus on Hispanic-oriented companies and family-owned businesses located in the United States. The new firm plans to invest $10 to $30 million of equity in companies that generate $3 million to $15 million in EBITDA. AUA Equity will make control and significant minority investments in a variety of transactions and structures including: traditional leveraged buyouts; growth equity; recapitalizations; and roll-up strategies. Since 1997, AUA Equity’s principals have made over 25 private equity investments which include: Reddy Ice Group, El Pollo Loco, TRUFOODS, Two-Twenty Records Management and Brighter Dental Care. The firm is based in New York, NY (www.auaequity.com).

“I am extremely pleased to be establishing AUA Equity with an outstanding team of private equity professionals and operating executives,” said Managing Partner Andy Unanue. “We have been working together for many years and I believe our combination of operational expertise and private equity experience uniquely positions us to identify compelling investment opportunities, especially in Hispanic-oriented companies and family-owned businesses, and create additional value in our portfolio companies.”

Messrs. Benyaminy and Flyer began their investment careers in CIBC’s Leveraged Finance and Merchant Banking Group and then helped establish Trimaran Capital Partners, a $1.0 billion private equity fund.

Mr. Chihi previously worked in Deutsche Bank’s Leveraged Finance Group and as an investor at an international family office.

Golub Backs Latest Frazier Healthcare Acquisition

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Golub Capital has provided $27.5 million in subordinated notes and co-investment equity in connection with the acquisition of 54 Fresenius Medical Care clinics by DSI Renal. DSI Renal is a portfolio company of Frazier Healthcare and New Enterprise Associates.

DSI Renal is a provider of dialysis services to patients suffering from chronic kidney failure. With this acquisition, DSI Renal will operate 85 clinics across 23 states and provide care to more than 6,500 dialysis patients. The company is based in Nashville, TN (www.dsi-corp.com).

“Working with Golub Capital’s Healthcare Finance team was a real pleasure. They proved to be a value-added partner with whom we could discuss preliminary ideas, as we ultimately closed the deal using structure and economic terms similar to what they recommended early in the process. We look forward to working with them again,” said Brian Morfitt, a Partner at Frazier Healthcare.

Frazier Healthcare is a provider of growth equity and venture capital to high growth and emerging healthcare service, biopharma and medical device companies. The firm has over $1.8 billion under management. Frazier Healthcare was founded in 1991 and has offices in Seattle, WA and Menlo Park, CA (www.frazierhealthcare.com).

Golub offers buy-and-hold products ranging from $10 million to $75 million and includes one-loan financings, senior, 2nd lien and subordinated debt, preferred stock and co-investment equity. The firm also underwrites and syndicates first lien loans up to $200 million. Golub Capital’s will hold up to $100 million per transaction. Industries of interest include consumer products, business and consumer services, defense, manufacturing, value-added distribution, media, healthcare services and restaurants. In addition to its New York headquarters, Golub also has offices in Atlanta, GA; and Chicago, IL (www.golubcapital.com).

“The Golub Capital Healthcare Finance team has a very positive view on the dialysis space, having invested in the sector multiple times. We started talking to Frazier Healthcare about their own interest in the sector mid-last year, so this investment represents one that developed very nicely over time,” said Stefano Robertson, a Managing Director and Head of Healthcare Finance at Golub Capital. “Throughout the process, both Frazier Healthcare and NEA exhibited their deep domain knowledge and experience dealing with multi-faceted transactional issues. We look forward to working closely with both sponsors throughout the course of the investment, and to helping DSI Renal execute their business plan.”

NEA invests in information technology, healthcare and energy technology companies at all stages in a company’s lifecycle, from seed stage through IPO. The firm has approximately $11 billion in committed capital. NEA has offices in the Washington, DC; Menlo Park, CA; and New York, NY (www.nea.com).

Denham Capital Closes Fund 6 at $3 Billion

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Denham Capital Management has held a closing on its sixth fund, Denham Commodity Partners Fund VI LP. Launched in July 2011 and closed eight months later in March 2012, Denham Capital raised $3 billion in total third-party commitments for Fund VI from a variety of institutional investors. Fund VI was oversubscribed, exceeding the targeted amount of $2.5 billion.

Denham received support from investors in its prior fund, with nearly 90 percent of commitments participating in Fund VI. Denham also added new limited partners from the public sector within the U.S. as well as from Europe and Asia.

Latham & Watkins served as the fund’s legal counsel and Park Hill Group acted as placement agent.

“We are very pleased to have completed the Fund VI raise in what remains a challenging global fundraising environment,” said Stu Porter, Chief Executive Officer of Denham Capital. “Thanks to very strong relationships with our limited partners, who share our belief that investment opportunities will continue to be robust around the sustained global demand for energy and resources products and services, we are able to quickly return our undivided attention to capitalizing on opportunities in these sectors. We are grateful for the support of our existing and new limited partners.” As with prior funds, Fund VI will invest in the energy and resources sectors worldwide, and applying Denham’s operational and commercial expertise and risk management strategies to create value in those investment opportunities.

The fund will invest in companies and assets in the oil and gas, metals and minerals and power and renewables sectors. To date, Fund VI has made investments in Cascade Petroleum, a Rockies-focused E&P company; Ursa Resources II, a follow-on venture with the Ursa Resources team, which Denham Capital backed previously; Fotowatio Renewable Ventures, a global solar power developer; Tremont Holdings, a partnership with Pangea Exploration to develop mining projects across Africa; and Stellar Mining, a Peruvian mining venture.

The closing of Fund VI brings the amount of invested and committed capital under Denham Capital’s management to approximately $7.3 billion. Denham typically targets investments in the $50 million to $250 million range. The firm has offices in Boston, MA; Houston, TX; Short Hills, NJ and London, UK (www.denhamcapital.com).