Private Equity (PE) investors have resorted to open market transactions to exit positions in publicly traded companies, riding the surge in liquidity as the coronavirus pandemic hampered trading activity on the market. private market.
Between January and August, those open market sales totaled $ 1.5 billion, accounting for half of all PE releases in value and volume, an EY analysis of VCCEdge data showed. Overall, outflows from PE fell 40% to $ 3 billion from the same period a year ago.
Last week, Blackstone sold a 23% stake in Essel Propack Ltd in a global deal worth $ 252 million ( ₹1861.50 crore). Earlier in September, another PE firm – ADV Partners – sold a 10.5% stake in Amber Enterprises for ₹604 crore, in a block deal.
Over the past few months, many other private equity firms such as Carlyle, Warburg, Partners Group and Westbridge Capital have sold a substantial amount of shares in the open market to reserve partial or full exits of investments.
“Most of these companies are trading above their pre-covid levels. In this current market environment of excess liquidity, institutional investors have a good appetite for high quality stocks. It is therefore not surprising that financial sponsors are reducing their exposure to the market. In most of these transactions, PEs only sell part of their holdings, ”said Jibi Jacob, Head of Equity Capital Markets at Edelweiss Investment Banking.
According to Vivek Soni, partner and national leader in private equity services at EY, the pandemic has had an impact on PE exits, with only a few sectors showing good exit activity.
“PE / VC outputs have faced considerable challenges, in large part due to the uncertainty created by covid. Much like investments, exits have also been polarized, with exit activity occurring in only a few sectors that have shown resilience – financial services, life sciences, technology, ”Soni said.
Soni added that the pandemic has led to a change in the mix of exit routes. “Unlike last year, there are hardly any significant exits through secondary agreements (PE to PE) or strategic agreements. Most of the exit value came from either IPOs (pre-covid) or exits from the open market, in which investors took advantage of the rising markets and partially sold their shares in quality listed franchises, primarily in financial services, “says Soni.