European private equity firms are keen to start bringing their best-performing portfolio companies to market, encouraged by early successes on the other side of the Atlantic.
Last week KKR KKR.UL successfully listed semiconductor business Avago Technologies Ltd and is considering listing a number of other companies as markets warm to new arrivals.
It is not clear yet whether there will be an IPO window but we believe that there may be an opportunity for strong resilient businesses to float in the first half of next year, said Kurt Bjoerklund, co-managing partner of Permira PERM.UL.
German cable operator Unity Media, owned by BC Partners BCPRT.UL and Apollo Management LP APOLO.UL, could launch a 1 billion euro ($1.4 billion) IPO early next year, banking sources said.
Frozen food group Birdseye Iglo, budget fashion chain New Look and Italian gaming firm Sisal, all owned by Permira, are also potential IPO candidates, bankers said.
Poor performances from companies in which they invested has plagued private equity houses -- who buy companies, look to improve their performance and then sell them at a profit -- while investor wariness has blocked possible stock market exits.
Private equity firms listed 217 companies in the banner years of 2006 and 2007, according to Thomson Reuters data, helping them return $309 billion to investors over the two years, figures from consultancy firm Preqin showed.
By contrast, returns to investors slumped 65 percent to $63 billion in 2008, Preqin data show, lagging far behind the $148 billion sought to fund new deals, squeezing investors' wallets.
Other than Avago, only two other private equity-backed companies have floated this year.
Market sentiment has improved though, with market volatility returning to the relatively benign levels of 2007 amd a near 50 percent rally by the S&P 500 stock index from its March low -- making it less risky to launch an IPO.
That doesn't mean all hurdles have disappeared, however. Investors are unlikely to tolerate the high leverage commonly seen on private-equity portfolio companies.
Bridgepoint BRDG.UL, for instance, is re-considering a float and other exit options for Britain's leading pet food chain Pets at Home, having mulled an IPO back in 2007.
But it would have to substantially reduce Pets at Home's debt of 288 million pounds, according to Thomson Reuters LPC data, reducing the equity owner's return from the float -- valued at 700 to 800 million pounds.
Law firm Travers Smith is advising Bridgepoint on the deal and is looking at 10 or 11 possible floats for private equity clients or other sponsors, said partner Andrew Roberts.
It just needs one or two to go -- and go successfully -- and it can lead to a whole rash, said Roberts.
And while good demand for a spate of recent rights issues shows a return of risk appetite among investors, the share sales may also have drained investor cash, said one fund manager.
There is a danger that some of these things just won't get away because they have got to be keenly priced and that may not be to the liking of private equity sellers, said Julian Chillingworth, UK equities fund manager at money managers Rathbone.
Bankers have assembled a list of prime IPO candidates and are confident many will list over the next 12 to 24 months.
It is just a question of when, not if, said Craig Coben, head of equity capital markets origination at Bank of America Merrill Lynch.
(Editing by David Holmes)