PE-led IPOs: Update Q1/2024 – To list or not to list?


Since the blockbuster IPO year in 2021, exits via public markets have been few and far between, especially amongst private equity portfolio companies. Volatile markets as well as (un)materialised losses on previously acquired stakes, have kept long-only investors and the important cornerstone investors in particular, largely at bay with only a few notable PE-led IPOs such as Ionos in Germany (Warburg Pincus) or Lottomattica in Italy (Apollo) in 2023.

However, it now appears that IPOs are back on the PE radar in 2024. Lower volatility, stock indexes at all-time highs as well as the need to execute exit strategies for large-cap assets have helped to start a partial clear-out of an extraordinarily full European IPO pipeline.

Of course, it helps if post-IPO trading trends upwards, as was the case with the early IPOs of 2024 namely; Athens Airport and Renk Group in Germany (Triton) – Renk Group’s share price almost doubled within 2 weeks post-IPO, creating the sought-after “IPO pop” that in theory negates the IPO discount granted to Cornerstone and other private Investors at IPO.

The listing of Galderma – which was the largest IPO in Q1 2024 – in Zurich pre-Easter (EQT, ADIA, GIC) was equally welcomed by public investors, closing 20% above its IPO price on day 1. The Douglas IPO (CVC) in Frankfurt however had to deal with a tougher reception, trading ca. 19% lower (as of EoM March) vs. the IPO price.

While an IPO window seems to have opened, public investors are still selective in terms of pricing and the equity story.


IPO Pricing and impact on equity shareholders including Management

All the above-named PE-led IPOs had something in common: they were priced at significant discounts to their listed peers, i.e. several EBITDA turns.[1]

Accepting IPO discounts of 20-30% or higher on the valuation to make the IPO fly has serious implications on (existing) shareholders. Typically, in Europe, PE LBO capital structures are converted into “ListCos” shortly before IPO, triggering an exchange of preferred instruments (shareholder loans, preferred equity etc) and ordinary equity (including the management sweet equity) into a uniform class of ListCo shares at IPO.[2] Converting the shares at the IPO price crystallises a value/capital gain at IPO for the existing Investors (PE and management). The final IPO price fixes the market cap of the to-be listed company at IPO and becomes the reference to calculate pre- and post-money valuations. Any IPO discount will instantly come off the value of the lowest ranking equity instrument, i.e. the ordinary equity and hence management’s sweet equity (“MEP”) PE funds however usually have most of their money invested in preferred instruments, unaffected by any IPO discount accepted. The consequence is a misalignment of shareholder interest at IPO: A PE fund is likely to / may have a lower acceptance threshold when it comes to the eventual IPO discount vs. the CEO/management.

In addition, the common-held belief that the post IPO-“pop” will fully rectify this mismatch is not true. The crystallisation of the IPO discount at IPO shifts the % shareholdings post-IPO from management to PE. Post-IPO management will require a higher “uptrading” of the share price (vs. PE) to get back to their sweet equity valuation pre-IPO discount.

Primary issuances at IPO (i.e. equity raised to lower the company’s leverage to levels accepted by public investors) amplify this point: at lower valuations, new Investors receive more of the “equity cake” post-money which means higher dilution for existing shareholders.

The Renk Group IPO did not have a primary component with Triton and Management selling >30% of their equity stakes at IPO via a sizeable secondary according to the IPO prospectus.

Douglas and Galderma however were highly levered pre-IPO, requiring primary issuances of ca. USD 1bn and USD 2.3bn respectively.


Management’s economic interest in an IPO

As the “face” of the to-be listed company, executive management is front & centre during IPO roadshows. However, while they are the “sellers” of the equity story, they are also shareholders who need to understand the impact that variables such as IPO discount, primary/ secondary and post-IPO uptrading have on their own equity stakes.

We advocate for open, timely and transparent discussions between PE and their management teams on the impact of an IPO on the MEP. This will build trust and confidence between shareholders while at the same is “just the right thing to do” given the significant economics involved for private individuals. Dynamics in fast-paced IPO processes are key, and it is vital that issues are addressed, and appropriate commercial solutions are explored and agreed in a timely fashion.

Higher equity sell-downs at IPO, lower lock-up requirements and/or different types of cash or equity bonuses at IPO are all useful tools to be used as part of these conversations. For example, cash or equity bonuses to be paid at IPO can be sized depending on the gap between actual IPO price vs initially targeted IPO price and could potentially be tied to certain post-IPO share price performance conditions to maintain alignment between shareholders post-listing. Jamieson can benchmark these commercial points vs. historic IPOs and provide a clear understanding to management teams, selling shareholders and IPO advisors of the current market for management term.

We have advised in numerous IPOs (including the Renk Group and Galderma IPOs this year) and while we predominantly focus on the treatment of the existing MEP programme at IPO, our newly formed Remuneration Advisory team headed by Tony Gilbert advises CEOs and management teams in discussions with the Supervisory Board on the future PublicCo compensation scheme.

We continue to advise a large number of management teams in ongoing IPO/ dual-track processes in Europe and maintain open communication channels regarding IPO structures and economics with various market participants, i.e. investment banks, private equity funds as well as legal and tax advisors.


As always, please reach out should you want to discuss– very happy to connect and compare notes.

Daniel Meschaninov is a director in the team at Jamieson and has extensive experience with IPO transactions. 


[1] Benchmarked to their closest peers, Renk Group, Douglas and Galderma EV/EBITDA discounts ranged from 4x to ca. 7x 2023 EBITDA. Source: Mergermarket

[2] “US-style” IPOs are typically not considered an Exit, LBO structures are not converted but remain in place “above” the entity stack which at a lower level includes the newly formed ListCo. More details under: Going public – the revival of the IPO as an Exit route: A view from Europe