Publicly Traded Private Equity - Response To Private Equity IPOs

Response To Private Equity IPOs

The initial public offering completed by Blackstone intensified the level of attention directed toward the private equity industry overall as media commentators focused on the large payout received by the firm's CEO Steve Schwarzman. Schwarzman received a severe backlash from both critics of the private equity industry and fellow investors in private equity. An ill-timed birthday event around the time of the IPO led various commentators to draw comparisons to the excesses of notorious executives including Bernie Ebbers (WorldCom) and Dennis Kozlowski (Tyco International). David Rubenstein, the founder of Carlyle Group remarked, "We have all wanted to be private – at least until now. When Steve Schwarzman's biography with all the dollar signs is posted on the web site none of us will like the furor that results – and that's even if you like Rod Stewart."

Meanwhile, other private equity investors would also seek to realize a portion of the value locked into their firms. In September 2007, the Carlyle Group sold a 7.5% interest in its management company to Mubadala Development Company, which is owned by the Abu Dhabi Investment Authority (ADIA) for $1.35 billion, which valued Carlyle at approximately $20 billion. Similarly, in January 2008, Silver Lake Partners sold a 9.9% stake in its management company to CalPERS for $275 million.

Additionally, Apollo Management completed a private placement of shares in its management company in July 2007. By pursuing a private placement rather than a public offering, Apollo would be able to avoid much of the public scrutiny applied to Blackstone and KKR. In April 2008, Apollo filed with the SEC to permit some holders of its privately traded stock to sell their shares on the New York Stock Exchange. In April 2004, Apollo raised $930 million for a listed business development company, Apollo Investment Corporation NASDAQ: AINV, to invest primarily in middle-market companies in the form of mezzanine debt and senior secured loans, as well as by making direct equity investments in companies. The Company also invests in the securities of public companies.

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