Fidelity and KKR eye IPOs

Posted Jun 8th 2009 8:30AM by Tom Taulli
Filed under: Private Equity

At the height of the buyout boom in 2007, private equity firms amassed expansive portfolios. Some of the drivers of the trend included: a growing economy and easy debt markets.

Of course, dealmaking has ground to a halt over the past couple years. However, private equity firms still need to find ways to get liquidity from their portfolios, so as to produce returns for limited partners.

How? Well, the IPO market will be crucial.

So, to this end, Fidelity Investments and Kohlberg Kravis Roberts & Co. (KKR) have agreed to form a venture to distribute IPOs to retail investors. Keep in mind that such offerings typically go to institutions and wealthy individuals. But private equity firms will need to expand their reach.

The problem: the IPO market has seen little volume. In fact, the slowness is likely to continue throughout the rest of the year (because there are only a handful of filings).

Yet, the IPO market can move quickly, as we've seen lately with the successful offerings of companies like OpenTable (NASDAQ: OPEN) and ChangYou (NASDAQ: CYOU). That's why it's smart of Fidelity/KKR to start now on putting together a platform and so that they are ready to move when things heat up again.

Tom Taulli is the author of various books, including The Complete M&A Handbook and the founder of BizEquity, a free online business valuation tool for small businesses.

Tags: Fidelity, inthenews, IPOs, KKR