From illiquid to liquid investments
Even though buy-outs in the private equity space is the highest yielding asset class around, it is also illiquid by nature. Turning an illiquid investment into a liquid one removes the main risk of the asset class as well as generates liquidity needed upon maturity of our bonds. The two main ways to do this is by either a trade sale, where you completely exit the investment, or by an IPO, where you either partly or completely exit your investment.
Our preferred semi-exit route of each portfolio company is through an IPO, as the public market is trading very generously in valuation multiples today. As we are building a synergic portfolio through a buy-build-and-hold strategy, we prefer to exit and liquidate mainly our principal risk and keep expanding our portfolio for the long run.
OUR PREFERRED EXIT - THE IPO
In today’s market, it is common to pursue both a trade sale and the IPO route simultaneously and chose the best exit once pricing and terms are known for each route. Looking at the European market for IPOs, there are several key points to take notice of:
- The average pricing P/E in UK (2016) is 36.2
- The average pricing P/E in Western Europe (2016) is 22.9
- The growth board exchanges are trading and performing significantly better than the main boards
By choosing an IPO route, we maximise trading multiple valuation and create liquidity to recoup our invested capital and still remain as shareholders for the longer run. In our experience, the founders of the companies in the portfolio rarely want to sell off their company completely, they actually like running and building it. An IPO is the best way for them to keep running their company while also capitalising on their progress now and in the future.
KEY REASON FOR OUR EXIT THROUGH IPO
- With the public market trading at average P/E of 22.9 in Western Europe and 36.2 in U.K., the timing for exit through IPO has never been better
- The growth boards perform significantly better than main boards on multiple giving a good pricing when floating the portfolio companies
- Average post-IPO performance relative to FTSE All-Share index from 2009 to 2015 in the UK is 14% after one year providing a good average continuous upside post IPO
- With our acquisition multiple below 7x earnings, the yield from acquisition to IPO at 22.9-36.2x earnings is high
- An IPO gives OMNIA Private Equity AG the possibility to recap invested capital and profits, but still remain as main shareholders continuously building a synergic portfolio to hold
- OMNIA Private Equity AG is a privately held investment firm that does not have a hard exit date as a private equity fund