General Atlantic’s prospective IPO is attracting the market’s attention, with the private equity firm having confidentially filed for a listing with the SEC. Reports indicate any General Atlantic IPO is likely to take advantage of suitable market conditions as they arise, although a deal may not be imminent.
Renewed enthusiasm for equity capital markets has highlighted several potential IPO candidates for 2024. General Atlantic is the first large private manager to list since TPG in January 2022. The prospects of a General Atlantic IPO are particularly interesting as investor confidence in an IPO calendar increases as the private equity market continues to evolve.
Recent Private Equity Headwinds
Sentiment for IPOs soured following TPG’s successful float, which coincided with a high watermark for the private equity industry. Today’s managers have recently faced headwinds in the traditional private equity sphere, although many are now expanding into the private credit arena. Higher interest rates have raised the cost of debt financing, while lower company valuations make profitable exits harder to achieve. However, the rally in equities and the recent decline in interest rates are likely to spark renewed activity.
Whether General Atlantic can emulate the success of industry leaders KKR and Blackrock, listed over 12 years ago, remains to be seen. Furthermore, other “next-generation” private equity companies could also follow with IPOs. Competition for assets has intensified as the private equity industry has matured. Managers have also found exits harder to engineer at a time when LPs have become more demanding regarding the return of their capital.
Global Success in Growth Equity
General Atlantic was founded in New York in 1980 by Chuck Feeney, the co-founder of Duty-Free Shoppers and noted philanthropist. With a focus on growth equity, the company has made over 500 investments and has $83 billion in assets under management. Best known for profitable investments in Facebook and Alibaba, General Atlantic invests in six key sectors today. In addition to Climate, Consumer, and Financial Services, it has dedicated teams for Healthcare, Life Sciences, and Technology.
After entering Europe in the late 1980s, General Atlantic expanded globally with offices in China, India, Brazil, and Southeast Asia. With a global platform across 16 locations, General Atlantic now conducts over 60% of its investments outside the US. Current Chairman and CEO Bill Ford joined in 1991. Co-Presidents Gabriel Caillaux, Martin Escobari and Anton Levy assumed their current leadership positions in 2019.
Expanding in Challenging Markets
Regardless of the timing of a potential IPO, General Atlantic has already started 2024 in earnest, expanding its capability in sustainable infrastructure. Bloomberg reported that an agreement to acquire specialist UK manager Actis would take General Atlantic’s AUM to approximately $96 billion. Actis, which manages some $12.5 billion, will become the sustainable infrastructure arm for General Atlantic’s platform.
General Atlantic acquired Iron Park Capital last year, creating a similar investment arm in the rapidly expanding private credit space. Iron Park manages approximately $4 billion in assets, and the two companies had partnered since 2020. While fundraising challenges have grown in private equity, the undisclosed deal gives General Atlantic a strong foothold in private credit. Another diversification play in October 2023 saw General Atlantic take a minority stake in new secondaries firm Clipway. Investing alongside European asset manager Carmignac, the deal provides enhanced access to the fast-growing secondaries market.
Climate investing has also been a considerable focus for General Atlantic, with the launch of BeyondNetZero in July 2021. Investing in climate growth equity companies, General Atlantic closed its first BeyondNetZero fund at the end of 2022, with $3.5 billion of dry powder. General Atlantic Closes Climate Solutions Fund
Fundraising for General Atlantic’s sixth flagship growth equity fund closed in November 2021 at $7.8 billion, above the $5 billion target. After the successful closing, General Atlantic had over $23 billion of committed capital.
GA sees its edge in private markets from operating outside the traditional fundraising cycle, leveraging a unique approach in its capital structure and capital commitments. Comprised of closed-ended funds, five-year managed accounts, and a GP commitment as the largest investor, General Atlantic highlights that stable capital access is ensured to pursue attractive investment opportunities through market cycles.
Top Ten Global Fundraiser
Regarding fundraising, General Atlantic ranked ninth on Private Equity International’s PEI 300 for 2023 at $48.69 billion. Blackstone and KKR led the pack with $125.6 billion and $103.7 billion, respectively.
Current portfolio companies number 225, including Israeli autonomous driving firm Mobileye and the German workforce management software group ATOSS. General Atlantic invested in Chinese TikTok developer ByteDance in 2017 and Asian fast fashion sensation Shein in 2022. Late last year, General Atlantic became the majority shareholder in US coffee and juice business Joe & the Juice.
Deal Flow Resumption Key to Private Equity Outlook
With expectations raised for deal flow this year, IPO filings from BrightSpring Health Services, and Amer Sports have attracted attention. Reddit is also rumored to be pursuing an IPO in late A1. However, any floatation involving a major private asset manager will be of particular interest despite recent challenges for the sector. Commentators highlighted the 40% drop in global private equity deal activity in 2023, alongside a 25% drop in leveraged buyouts. Diagnosed with a “serious case of indigestion” by the FT, private equity firms struggled to find buyers for portfolio companies last year. While many funds still have plenty of dry powder to deploy, the absence of liquidity slows down payouts to investors in existing funds. These delays, in turn, discourage investors from committing fresh capital to new funds.
Expectations of interest rate cuts and rising equity markets, however, could help M&A activity resume. One such uptick in M&A is within the private equity sector itself. In mid-January, BlackRock moved into alternative assets, agreeing to acquire Global Infrastructure Partners for $12.5 billion. Adding over $100 billion in AUM, the deal creates a combined infrastructure platform worth over $150 billion, BlackRock said.
Further M&A in private equity is predicted amid the challenging conditions for fundraising as firms look to grow. Partners Group CEO David Layton shared with FT that private markets are experiencing “a new phase of maturation and consolidation.” Partners Group manages $142 billion in assets, and Layton said these forces will reshape the industry over the next decade.
Timing Key for IPO
Although General Atlantic has filed with the SEC, some reports indicated an IPO could still be as long as a year away. Nevertheless, the company could act fast when a suitable listing window opens. Among other listed comparatives, KKR shares are up 46% over the past six months, and Blackstone is up 19% over the same period. TPG, which floated two years ago, is up 9% over that period and up 42.8% in the past six months.
At a crossroads, the private equity sector has changed considerably from when Blackstone and KKR were listed after the financial crisis. In addition to a downturn in deal volume, private fund managers are also grappling with greater regulation. With new rules, the SEC has intensified its focus on private fund advisors in the past year. On the other hand, commentators point to a potential avalanche of M&A as markets continue to rebound. With private asset managers also likely to feature strongly in this next wave, the prospects of a General Atlantic IPO will be closely watched.
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