Analysts are telling Kohlberg Kravis Roberts & Co to scrap its plans for an initial public offering, saying tighter credit markets make the private equity firm a less attractive investment than it appeared to be just a few months ago.
We have certainly come a long way since last spring, when Henry Kravis was instructing the world about the “golden age” of private equity. (More recently, George Roberts, Kravis’s cousin and partner at KKR, told a German magazine that he expects returns on buyouts to “significantly” from where they’ve been. “The coming years will be harder, no question,” Roberts said according to reports.)
"They should absolutely, unequivocally, withdraw the IPO," David Menlow, president of research firm IPOfinancial.com, tells Reuters.
Offerings from hedge funds and private equity shops pose a special dilemma for analysts at investment banks. Because they are involved in so many deals, private equity firms pay lots of fees to investment banks. And this can put pressure on analysts to give favorable ratings to the companies.
Covering hedge funds and private equity firms may also renew conflict-of-interest concerns Private equity-related fees, including those from advising and underwriting, accounted for $15.6 billion, or 20 percent of total global investment banking revenue last year, according to data provider Dealogic.
"The greatest challenge one faces as an equity analyst looking at Blackstone is the fact that they are one of the largest investment banking clients," said Hintz. "It isn't going to make you very popular if you put an 'underperform' on them."
Not surprisingly, many of the analysts who are calling for KKR to pull its IPO work for independent firms that don’t suffer from fee-related conflicts.
KKR should pull its IPO: analysts [Reuters via Washington Post[
Formerly private equity firms irk stock analysts [Reuters]