Carlyle abandons flotation to sell half of its majority stake
Since the summer, London’s IPO market has seen postponements, cancellations and low pricings as confidence ebbed. Feeling the effects, US private equity giant Carlyle, advised by Linklaters corporate partners Charlie Jacobs and Alex Woodward, recently abandoned plans to exit roadside recovery service company RAC through a flotation, in favour of a sale to Singapore’s sovereign wealth fund GIC.
The sale of half of its majority stake in RAC, the UK’s second largest roadside recovery provider, comes three years after Carlyle purchased it for £1bn. Clifford Chance advised on that deal, with a team led by private equity head David Walker, who has since moved to Latham & Watkins. However, CC was shunned by Carlyle on the latest deal as Linklaters, and Jacobs in particular, were seen as a better option for running an IPO.
But the change in tack to a private equity sale also saw Travers Smith senior partner Chris Hale called in to marshal Carlyle’s management on the deal, with its stake rising from 15% to 20%. Market analysts believe RAC is now worth close to £2bn, which means Carlyle is likely to have recouped most, if not all, of its initial investment, while maintaining 50% of its holding.
GIC rehired Freshfields Bruckhaus Deringer, which advised the fund on its acquisition of a 28.5% stake in UK pension insurer Rothesay Life from Goldman Sachs in 2013, with a team led by London corporate partners Richard Thexton and David Higgins, with support from Adrian Maguire.
At Linklaters, Jacobs and Woodward were assisted by private equity partners Stuart Boyd and Nicole Kar.
London-based Latham corporate partners Richard Brown and James Inness advised the underwriters in the run up to what would have been a London listing, but the decision to switch from the IPO came quickly as confidence left the market. Hale noted: ‘The most challenging bit was working to an exceptionally tight timetable as we had to do it in a week.’
‘We’ve seen a very noticeable uptick in work since the beginning of September as we’re one of the few firms that focuses on advising management in this way for the leading private equity firms,’ Hale added. ‘Private equity selling to private equity declined in the first six months of the year, as a lot of businesses that would have gone down that route went to IPO instead. With the IPO market now encountering choppy waters, secondary buy-outs are likely to become more common again.’
tom.moore@legalease.co.uk