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Private Equity Firms Gear Up for an IPO Boom

The Michaels IPO could just be the start of a run


This year might be a turning point for the major private equity players like  Blackstone (NYSE:BX) and KKR (NYSE:KKR).

Right now, the IPO market appears to be picking up momentum. In other words, private equity firms are likely to push hard to get their portfolio companies public.

Perhaps the first major deal will be Michaels Stores, which is the largest specialty retailer of arts and crafts. According to Reuters, it looks like the company’s private equity backers — Blackstone and Bain Capital — will file the necessary papers for an IPO by next week. The report also indicated that the lead underwriters will be JPMorgan Chase (NYSE:JPM) and Goldman Sachs (NYSE:GS).

Michaels went private in 2006 in a $6 billion transaction. While deal resulted in $4.26 billion of debt, the company was able to handle it because of its strong cash flow generation. Last year, it posted a 4.4% increase in sales to $4.21 billion and had operating cash flows of $413 million. By the end of last year, Michaels had 1,063 stores. But the company plans to roll out about 50 more for 2012.

If the IPO is a success, investors can expect some other high-profile deals to hit the market. Some potential candidates include Toys “R” Us, luxury fashion retailer Neiman Marcus, payment processor First Data and hotelier Hilton.

Between 2005 to 2007, private equity firms struck about $1.6 trillion in buyouts (according to research firm Preqin), and have made around 12,500 deals since 2002.

That means there’s plenty of potential IPOs to go around, and plenty of money to be made.

Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “The Complete M&A Handbook,” “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli or reach him via email. As of this writing, he did not own a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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