IPO exit route’s attraction in age of antitrust scrutiny

There was some big news overnight from the US on the regulatory front, so we take a brief look at that this morning before we analyse why the IPO exit route has become more attractive as authorities take a harder line on antitrust issues.

Switching to deals and it’s a pretty busy morning for this time of the year. We have Main Capital Partners exiting a company to Pollen Street Capital, a CapVest portfolio company completing the acquisition of a financial data platform and Phoenix Equity Partners investing in a managed IT services provider.

Regulation

Before we dive into the deals, I just wanted to touch on a couple of regulatory points – including one advantage to selling via an IPO.

First though, many eyes were on the US Securities and Exchange Commission yesterday, as it adopted what my colleague Bill Myers called “the most sweeping new rules for the private fund industry since Dodd-Frank”. You can read Bill’s piece on that over on Private Funds CFO.

While the rules are of course in the US, time and again we’ve heard the adage that ‘what happens on one side of the Pond will happen on the other’. We’ll be keeping an eye on European regulators’ moves from here.

One large area that is affecting M&A on both sides of the Atlantic though is an increased scrutiny of antitrust concerns. We’ve covered that at length on PE Hub Europe, but one head of equity capital markets I spoke to yesterday made a point that I hadn’t considered before.

The moribund IPO market this year – in Europe and the US – has of course limited sponsors’ exit options. But that’s been particularly annoying given that an IPO is one sure-fire way to avoid any antitrust issues.

“Many of the most prominent M&A sales have been stopped due to antitrust and the IPO exit alternative for those kind of companies is actually pretty attractive,” the ECM head said. “There’s no antitrust when selling to public investors. You have a kind of deal certainty which you don’t have in, say, the latest Microsoft acquisition, which takes years to close. We have other private equity examples where the signing to closing has taken several years.

“The IPO market is a bit more forgiving. You can at least sell the shares to whomever you like, and the regulator will not say anything. The IPO market has some benefits that I didn’t think it had three to four years ago due to the regulatory issues we are seeing in M&A sales.”

As an example, SoftBank-owned UK microchip giant Arm this week filed to IPO in the US, having had to cancel its takeover by rival Nvidia in 2022 after the Federal Trade Commission sued to block the deal on antitrust grounds.

Recruitment

Main Capital Partners will sell Assessio, an e-assessment company for recruitment and development, to Pollen Street Capital.

Assessio’s revenues more than doubled during Main’s investment period, according to a release. It is headquartered in Stockholm, Sweden.

Main Capital made its strategic investment in Assessio in 2019.

“Since our partnership in 2019, we have seen significant growth, claiming market leading positions in the Benelux and Nordics regions as well almost tripling in size and profitability,” said Wessel Ploegmakers, partner at Main Capital.  “Through organic growth and a selective buy-and-build strategy, the HR-software provider for talent assessment has emerged as a prominent player in Northern Europe.”

Charly Zwemstra, founder and managing partner at Main, had tipped PE Hub Europe off about the deal, telling us last week that his firm was working on two ‘record’ exits in H2.

Deal info

CapVest-backed Datasite has completed the acquisition of MergerLinks, a financial data platform.

MergerLinks is headquartered in London. Finance professionals use the platform to find deal information, promote credentials, and connect with investors, companies, and advisors for capital transactions.

MergerLinks and its management team will operate as a strategic product unit within Datasite.

“With MergerLinks’ vetted deal and relationships data, Datasite can now help facilitate the ideation phase of a transaction,” said Rusty Wiley, chief executive officer of Datasite. “Combined with our other deal pipeline, marketing, preparation, diligence and acquire applications, dealmakers now have a unique, single place where they can generate and manage their deals end to end to reduce deal friction and optimise outcomes.”

Cybersecurity

Phoenix Equity Partners has invested in Nostra Technologies, a managed IT services provider in Ireland.

Nostra is headquartered in Dublin. The company provides cybersecurity and cloud infrastructure to over 700 SMEs across both the private and public sectors. It saw over 20 percent organic growth per annum over the past three years.

Phoenix will invest alongside Nostra’s founders Kevin O’Loughlin and Barry O’Loughlin.

Nostra is Phoenix’s third investment in 2023. The firm’s other investments include Logiq and 4most.