Gillian Tan is a Bloomberg Gadfly columnist covering deals and private equity. She previously was a reporter for the Wall Street Journal. She is a qualified chartered accountant.

(Corrected )

After a dismal first quarter for initial public offerings, equity capital markets bankers are finding some relief from a familiar cohort: Private equity firms.     

Only 22 IPOs have taken place this quarter on U.S. exchanges, raising $1.5 billion -- the lowest total in seven years.

Quiet Times
Just $1.5 billion was raised via IPOs in the first quarter of 2016, the lowest total since the first quarter of 2009.
Source: Bloomberg

As markets rebound and volatility becomes less of a concern, IPOs could make a comeback, but that's not guaranteed. In the meantime, bankers are focusing more of their attention on block trades -- the sale of large parcels of stock, often at slight discounts.

Private equity firms were behind $4.2 billion of this quarter's follow-on offerings (including block trades) on U.S. exchanges, according to data compiled by Bloomberg. That's nearly triple this year's IPO volume, though still only a fraction of the $17.4 billion they had sold by this point last year.  

But there's the potential for plenty more trades to be made: By taking companies public and accepting a buyer's stock when selling others, private equity firms collectively own U.S. public company stakes worth over $75 billion (and close to $100 billion if offshore stakes are included). 

Selling Out
Private equity firms have sold $213 billion worth of public company stakes in the past five years, and have much more to shed.
Source: Bloomberg

While firms generally aren't under strict time pressure (most investments are held in 10-year funds), they're inevitable sellers. For banks, which are usually guaranteed fees for underwriting and reselling those stakes to investors, it can be a lucrative business.

There also are risks, as was seen last May, when Bank of America, Citigroup and Deutsche Bank landed coveted roles selling a $2.7 billion stake in Hilton Worldwide Holdings for Blackstone Group. Stung by a stock slump, they lost a combined $90 million by underwriting the share sale, Bloomberg News reported.  Even so, returning calm to markets may help mitigate these risks.

Calm Ahead?
The VIX Index, which reflects a market estimate of future volatility, is near a seven-month low.
Source: Bloomberg

Blackstone's remaining stake in Hilton -- worth some $10.2 billion -- remains the biggest position held by a buyout firm in a public company. This, and rival firms' large stakes in companies including IMS Health, NXP Semiconductors and Walgreens Boots Alliance may stay on the shelf a while longer as private equity backers wait for the stocks to rally.

Action is more likely among firms' already-profitable holdings. Take for example, the stake held by Advent and Goldman Sachs's private equity arm's in credit reporting agency TransUnion, which they cut to $3.5 billion earlier this month. The stock is now trading not far from its all-time high, 23 percent above its IPO price and nearly 11 percent ahead of where the duo sold a portion of their holdings on March 7, suggesting they may keep selling.  


Another likely candidate is Blackstone's $2.7 billion stake in Brixmor Property Group, which it hasn't touched since last March. Those shares have rallied 27 percent since the company's October 2013 IPO. So too is Apollo Global Management's $1.9 billion stake in Norwegian Cruise Line, which it most recently trimmed in December (the shares have nearly tripled since the company's January 2013 IPO). 

There are also smaller situations such as KKR's $205 million stake in Marvell Technology Group. The firm was considering a leveraged buyout of the company back in November 2013 which never came to fruition. Unless the firm is still weighing a deal, it may be time to cut ties with the company.

Even if private equity firms keep sitting on the majority of their public holdings, bankers' heightened dialogue with them is never for naught. After all, the firms own a myriad of companies that could go public once the IPO market regains strength, offering the prospect of future fees one way or the other.

Peter Grauer, the chairman of Bloomberg LP, the parent of Bloomberg News, is a non-executive director at Blackstone. 

--Rani Molla contributed graphics to this column.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

(Corrects number and dollar amount of IPOs in the second paragraph to reflect offerings on U.S. exchanges. An earlier version reflected IPO activity by U.S. companies only.)

  1. Sometimes, as in the case of Warburg Pincus's sale of its stake in Premier Foods to Nissin Foods, strategic buyers may fill the role of institutional investors.

  2. Hilton, IMS and NXP are all trading between 22 percent and 28 percent below their one-year highs while Walgreens Boots Alliance is roughly 14 percent lower than its 12-month high. 

  3. KKR may choose to stick around a little longer to see if Starboard's activist involvement pays off (which is not really what private equity firms are paid to do). 

To contact the author of this story:
Gillian Tan in New York at

To contact the editor responsible for this story:
Beth Williams at