A Detailed Look: Which Private Equity Firms Are Going Public

When Blackstone announced it was pursuing an IPO, the underwriting group included Morgan Stanley and Citigroup, with smaller roles by Merrill Lynch, Lehman Brothers, Credit Suisse and Deutsche Bank. Many in the industry considered Goldman Sachs' surprising absence from the group a major snub. The theory was that Blackstone and other PE shops were incensed over Goldman's major push into the PE world. Lloyd Blankfein, Goldman's CEO, has flatly denied these rumors insisting that his bank has great relationships with the other PE shops in spite of Goldman's huge new $20 billion buyout fund.

The truth of the matter however may be that there is another reason why Goldman isn't on the Blackstone deal, that reason is Henry Kravis, or perhaps Leon Black, depending on who you talk to. The New York Post reported that Goldman may be working with Kravis of Kravis Roberts & Co. on their IPO plans, or perhaps helping Leon Black of Apollo figure out if an IPO was in their future. Obviously with Goldman working with their competitors Blackstone decided to stay away. Mr. Blankfein makes a good point: "it's impossible for us to be in every piece of business." Of course more and more it seems that Goldman IS in every piece of business, but I digress . . .

So lets update our list of Private Equity Firms Going Public or at least considering it:

1. Ripplewood Holdings: They took one of their funds public in Belgium.
   
2. Goldman Sachs (GS): Okay, okay they aren't just a PE shop, but they do have one of the largest buyout funds, are publicly traded and have a forward PE ratio under 10. In my opinion GS is probably the safest/best play in the area.
   
3. Fortress Investment Group (FIG): IPO'd in early February, has been very volatile.
   
4. Blackstone Group: Closest private equity firm to an IPO. But should you invest?
   
5. Carlyle Group: In "monitoring mode" for an IPO, whatever that means.
   
6. Kravis Roberts & Co.: Probably just rumors . . .
   
7. Apollo Management LP: Considering a partial sale to private investors.
8. TPG Capital (formerly Texas Pacific Group): They aren't talking, but they are watching.
   
9. Thomas H. Lee: Not considering a public offering because of lack of diversification.
   
10. Permira: Firm's largest investor says younger management makes an IPO unlikely.
11. Bain Capital: "Not actively looking at it, but we're always open-minded"
    

What does this all mean? With so much new money flowing in to buyout firms, with the universe of available deals shrinking and with the cost of debt rising, it doesn't seem like the boom in private equity can continue much longer. Each available deal is getting squeezed by competition and costs. Let us not forget that just this year a bidding war drove the cost of Equity Office Properties up by $3 billion!

But, with most of the top funds having billions to employ, the frenzy to snap up whatever deals remain will surely lead to an exciting 2007. I wouldn't be surprised if within the next year we see the largest buyout in history.