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Back to blog October 31, 2018 No Comments Author: Andy Jones

Private Equity Investments in Public Companies

While most private equity firms invest in privately-held companies, on occasion PE firms will hold positions in publicly-traded stocks. Currently, our database shows 405 private equity firms collectively hold 938 separate investments in 730 unique U.S. publicly-traded companies.

There are two reasons how a private equity firm might obtain equity positions in publicly-traded companies, either the private equity firm:

  • Is exiting a portfolio company through an IPO;

Of the 239 IPOs so far in 2018 (on the three major U.S. exchanges), 64 (27%) currently have investments by at least one private equity firm. (This statistic might have been higher if I accounted for exits from these positions post-IPO, but I did not account for this).

  • Made a direct investment into a public company

This is done either by purchasing shares on the open market or by a capital raise from a public company (private placement or perhaps the issuance of preferred shares).

The data shows both cases, IPOs and direct investments. Recently, the IPO case is more probable for pharmaceutical and biotech companies, while direct investments are more likely for companies in other industries.

Most Common Industry Sectors for Private Equity Investments in Public Companies

70% of private equity investments in public companies are concentrated in just four industry sectors: Healthcare, Consumer Services, Technology and Energy. Surprisingly, manufacturing did not top the list as it likely would have in years past.

Private Equity Investments into Public Companies - by Sector

By far, the most favored sector was Healthcare (34% of investments).

Within the Healthcare sector, most investments were in Pharmaceutical and Biotechnology companies.

Most Active Private Equity Firms Investing in Public Companies

Of the 405 private equity firms with positions in public companies, some are considerably more active in owning stakes in public companies. The 11 PE firms shown below each have more than 10 public company investments. (NOTE: in this case, the text below about the PE firms’ industries of interest only refers to investments in public companies).

  1. Foresite Capital (57 investments) – Almost exclusively focused on biotech and pharmaceuticals.
  2. OrbiMed Advisors (47 investments) – Mostly invested in biotech and pharmaceutical companies.
  3. TPG (22 investments) – Emphasis on pharmaceuticals and medical specialties, but investments include a smattering of other industries as well.
  4. Aisling Capital (20 investments) – Almost exclusively invested in biotech and pharmaceuticals.
  5. Polaris Partners (14 investments) – Invested exclusively in biotechnology, pharmaceuticals and medical instrument companies.
  6. KKR & Co. (13 investments) – Invested in a range of various sectors in the healthcare, consumer and technology industries.
  7. Blackstone Group (13 investments) – Invested in a diverse mix of end industries including chemicals, minerals, consumer products, consumer services, energy, healthcare and business services.
  8. Frazier Healthcare Partners (13 investments) – Exclusively focused on biotech and pharmaceuticals.
  9. Technology Crossover Ventures (12 investments) – Emphasis on software with some consumer services investments as well.
  10. Oak Hill Capital Partners (11 investments) – Some emphasis on consumer services but a mix of various industry sectors (industrial, banks, telecommunications equipment and software).
  11. Warburg Pincus (11 investments) – Predominantly oil & gas production and software companies.

Public Companies Favored by Private Equity Investors

Conversely, some public companies attract more private equity investors. Each of the following seven public companies have at least four active private equity investors.

  • Avalara, Inc. (AVLR)

Avalara’s SaaS solution provides a complete set of transactional tax compliance services developed specifically to serve the needs of small to mid-sized businesses.

PE Investors: Battery Ventures, Lynwood Capital Partners, Sageview Capital, Technology Crossover Ventures, Warburg Pincus

  • Arsanis, Inc.  (ASNS)

Arsanis, Inc. is developing monoclonal antibody therapeutics against severe infectious diseases that cannot be controlled with currently available medical treatments.

PE Investors: NeoMed, OrbiMed Advisors, Polaris Partners, SV Health Investors

  • BrightView Holdings, Inc. (BV)

Brightview is a provider of commercial landscape maintenance and snow removal services.

PE Investors: CPP Investment Board, KKR & Co., MSD Private Capital

  • Collegium Pharmaceutical, Inc. (COLL)

Collegium Pharmaceutical, Inc. is a specialty pharmaceutical company focused on developing and commercializing abuse-deterrent products that incorporate its DETERx platform technology for the treatment of chronic pain and other diseases.

PE Investors: Boston Millennia Partners, Frazier Healthcare Partners, Longitude Capital, TPG

  • Kala Pharmaceuticals, Inc. (KALA)

Kala is a clinical stage pharmaceutical company focused on innovative nanoparticle-based treatments for ocular diseases.

PE Investors: Longitude Capital, OrbiMed Advisors, Polaris Partners, Ysios Capital

  • Laureate Education, Inc. (LAUR)

Laureate Education is an owner and operator of international universities serving students in many countries with curriculum in many disciplines.

PE Investors: BV Group Ventures, Snow Phipps, Sterling Partners, Torreal

  • Plains All American Pipeline, L.P. (PAA)

Plains All American Pipeline, L.P. is a publicly traded master limited partnership that owns and operates midstream energy infrastructure and provides logistics services for crude oil, natural gas liquids, natural gas and refined products. Plains owns an extensive network of pipeline transportation, terminalling, storage and gathering assets in key crude oil and NGL producing basins and transportation corridors and at major market hubs in the U.S. and Canada.

PE Investors: EnCap Investments, The Energy and Minerals Group, First Reserve, Stonepeak Infrastructure Partners