KKR and Fidelity team to offer access to IPOs
Posted by: admin in Engagements and Deals NewsFiled under: Deals, KKR, Engagements
Investors have long coveted hot initial public offerings. But access to the biggest IPOs usually requires big money and insider connections. However, a deal between Kohlberg Kravis Roberts & Co. and Fidelity Investments might change that.
The companies are reportedly near a deal to give some of Fidelity’s 20 million individual and institutional clients access to IPOs by the stable of companies in which KKR has made private equity investments.
The alliance could help both companies, The Wall Street Journal reported (subscription required). KKR wants to use its own capital markets unit to underwrite offerings by its portfolio companies. That could be a boon to the private equity giant; after all, the investment banks that usually act as middlemen in such transactions don’t do so for free. And Fidelity could win new customers eager to purchase what could become the next big stock as soon as possible.
Even so, the move carries risks for both companies. For KKR, underwriting its own portfolio companies’ IPOs could anger the investment banks being cut out of the loop and make it harder to get merger advice, sell debt, or do other kinds of deals. Meanwhile, Fidelity could face a backlash if its customers begin losing money on KKR IPOs that flop.
Indeed, IPO stocks are riskier to invest in than shares of more established companies. They’re tougher to value and prone to huge fluctuations in price. But their record this year has been decent, to state the least: Four of the past five companies to go public are trading well above their IPO prices. And Renaissance Capital’s index of current IPOs is 27% higher this year, outperforming broad market measures.
Still, KKR and Fidelity’s pact may not truly bear fruit until the IPO market comes back to life. And that’s unlikely to happen before the large issues facing Wall Street and the economy are mended.
KKR and Fidelity team to offer access to IPOs originally appeared on BloggingBuyouts on Mon, 08 Jun 2009 12:40:00 EST . Please see our terms for use of feeds.
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