• Permira is front-footed seller with several stakes in the spotlight
• Large-cap blocks remain big focus for next year

Private equity shareholders, absent protagonists from EMEA blocks this year, are gearing up to return to equity capital markets in 2024 and start selling down stakes in their listed holdings, ECM bankers and investors tell the ECM Pulse.

“Several sponsors have been locked in stakes since IPO and need to start exiting given likely pressure from LPs,” an investor noted looking ahead to 2024.

A bull market in recent months has added to the momentum, with many sponsor-held stocks close to yearly highs, although often still below IPO price. For some sponsors, selling below IPO price may be palatable enough given many will have profited already from their initial investments in the listed holdings through IPO proceeds, dividends and fees.

“It is straightforward, although every asset is different, the ones that are in the money are all now targets for block trades,” said an ECM banker.

Financial sponsors were largely absent from the market in 2023 and 2022. While volumes for sponsor-backed blocks in EMEA in 2023 reached USD 12bn, around USD 8bn alone can be attributed to three large trades in London Stock Exchange Group [LON:LSEG] where Blackstone was a seller.

The sell-downs were not part of the typical sponsor exit process, where a private equity firm will sell an initial stake through IPO and then fully exit through subsequent block trades, but a shareholding linked to the sale of Refintiv to LSEG Group by Blackstone and a consortium of other shareholders including Thomson Reuters.

Permira in line of site

One seller seen as front-footed in examining equity windows for their share stakes is Permira, which hit the market at the end of November with a EUR 180.7m block in TeamViewer [ETR:TMV].

ECM Pulse noted in February that the stock had found an attractive level since the lows of 2022, although well below previous sell-down prices.

Permira took that option on 21 November, and there is talk that the PE fim could do so with other stakes.

According to data from ECM Pulse’s sister publication Unquote, TeamViewer sits in Permira V, the sponsor’s 2013 vintage fund. Another company in that same fund is Dr Martens [LON:DOCS].

“Permira is one that has a lot to do on sell-downs,” the investor said. “There is a lot of chatter about what it wants to do with its Dr Martens' stake,” he added.

A second ECM banker confirmed that he had spent time looking at Permira's listed stakes, particularly Dr Martens, but predicted that if any sell-down process was to start up again it would be slow, with no chunky initial sale.

While Dr Martens is trading well below IPO price, Permira only bought the UK bootmaker for GBP 300m in 2013. Considering that Permira was the primary seller in Dr Martens GBP 1.29bn IPO, and has sold down since, it has already made a substantial return.

In addition to TeamViewer and Doc Martens, Permira also owns stakes in Polish e-retailer Allegro [WSE:ALE] and France’s Exclusive Networks [EPA:EXN] listed in 2020 and 2021, respectively. Both those firms sit in Permira VI, the sponsor’s 2016 vintage fund according to Unquote data which might imply less pressure to sell.

Permira sold some of its Allegro stake as part of a USD 413m-equivalent block, alongside Cinven and Mid-Europa in June, but did not participate in a subsequent USD 363m block in October alongside the other two, given a fall in the stock since the June sale.

Permira declined to comment on its exit strategy for its listed holdings.

Lock-ups on Allegro and TeamViewer expire on 8 January and 21 February 2024, respectively, according to Dealogic | ECM's lock-up report. January will also see Var Energi [OSL:VAR], held by HitecVision, come out of lock-up.

Short-term pain, long-term gain

Permira is likely not the only one mulling a return to ECM to shift out of old positions and rotate capital, a third ECM banker said. While selling a stock below IPO price might seem painful, it can inject life into an orphaned stock post-IPO.

“When sponsors sell after the IPO it can help rerate the stock given the boost in liquidity,” said a second investor. “Clearly it is a bit of a catch-22, if the stock is at a level the sponsor wants to sell it, we might not be keen on buying it, but they can do a smaller deal at a level that investors like and create some demand tension.”

The investor noted it is a careful exercise, a deal must be large enough to be seen as a viable path to an exit, but it does not have to be a mega sell-down to get investors interested. There is likely to be no shortage of those next year, with lock-ups in LSEG expiring in March, allowing for the Refinitiv consortium to come back to market with another multi-billion deal.

The first investor said he is also keeping an eye on large bank privatisations, a theme covered by ECM Pulse last month. Recent privatisations in Ireland’s AIB Group [DUB:A5G], National Bank of Greece [ETE:NBG] and Italy’s Monte dei Paschi [BIT:BMPS] added billions to deal volumes in 4Q and sales in all three can begin again after lock-ups expire on 7 February, 19 May and 21 February, respectively, according to Dealogic’s Lock-up Report.

While IPOs remain in the cold, recent market moves mean the force is clearly with block sellers in EMEA.