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It has been a tough year for private equity companies looking to sell their investments to the public markets. In the first six months of the year there were only 14 exits, worth $5.2bn, via initial public offerings, according to Preqin data. Four years ago, the total was $37bn. Can the listing of a maker of washing machines restore the spin?
One problem is that companies unloaded by private equity on to public markets have performed patchily. Consumer-data firm NIQ Global Intelligence, educational content provider McGraw Hill and childcare centre operator KinderCare Learning are all trading well below their IPO prices. Buyout firms could use some more successful issues to show that not everything they proffer has already been wrung dry.
Alliance Laundry Systems is giving it a shot. The company behind the Speed Queen brand of washers and dryers this week successfully raised $826mn. Private equity owners BDT & MSD priced its upsized offering at the top end of the marketed range, valuing the company at $4.3bn. The shares gained 13 per cent on Thursday, their first day of trading.
On paper, making commercial and industrial laundry machines is classic private equity: stable and cash-generative. Alliance has managed to muster growth too, furnishing commercial laundromats in hotels, dorms and apartment buildings. With a 40 per cent share of the commercial laundry market in North America, it has increased revenue a compound annual rate of 9.5 per cent since 2010.
The company does, however, bear another classic feature of private equity-owned companies: debt. It had more than $2bn of net borrowings at the end of June — or nearly six times the company’s 2024 ebitda — up from $1.2bn at the end of 2023. Yet BDT & MSD, its co-investors and a group of management shareholders took out a $900mn dividend payment last August. Alliance says its IPO proceeds will help pay down its debts.
There is something reassuring about Alliance’s sturdy first-day performance, especially in a market that is bloated with artificial intelligence hype. True, the company says it uses machine learning to develop features such as “predictive maintenance”, but it’s hardly the company’s main selling point. It suggests that mature industrial companies can generate enthusiasm too.
Investors, of course, will need to be wary of companies coming to market overly burdened with borrowings and whose private equity owners will retain majority voting rights, as is the case with Alliance. Nonetheless, the signs are encouraging for all those buyout firms hoping their past acquisitions will come out in the wash.
pan.yuk@ft.com
