Inside Bridgepoint’s IPO: how to go public while your carry stays private

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Schwarzman and co disclose their carried interest. Bridgepoint’s bosses don’t

It’s hard to be a public company these days, private equity executives will often tell you, as they snap up UK-listed businesses at their fastest pace in decades. 

It’s far more attractive to leave onerous disclosure rules behind and be privately owned so that, among other things, details of your top executives’ pay aren’t held up for public scrutiny, they might add. 

But what if you could have your cake and eat it too, enjoying the benefits of a London listing with some degree of privacy?

While the pay awarded to Blackstone’s Stephen Schwarzman and KKR’s Henry Kravis is known, William Jackson, chair of Bridgepoint, and his fellow executives are paid through a complicated structure © FT montage; Charlie Bibby, Bloomberg

Enter Bridgepoint, the UK private equity firm that went public this summer in the first London listing of a buyout group since 1994, and did so without publicly disclosing the full sums of money that its most senior figures receive in connection with their roles. 

How? It has disclosed pay and bonus numbers (£1.3m combined for executive chair William Jackson in 2020), but not how much individuals receive in carried interest — their often-lucrative share of profits on the funds they invest. Sums received in “carry” can sometimes dwarf other forms of pay. 

Bridgepoint’s prospectus shows the total sums paid out in carry (£41m in 2020 and £494m in 2019), without mentioning who, or how many people, they were shared between. 

It works differently in the US, where carried interest payments received by named top executives at listed firms such as Blackstone, Carlyle and KKR are published as part of their remuneration — even though it’s taxed as a capital gain. 

Bridgepoint doesn’t appear to have broken any rules, and a spokesman for the company said it had “followed all relevant UK listing disclosure regulations in our prospectus, as confirmed by our listing, regulatory, legal and accounting advisers” and that “to suggest otherwise is wholly misleading and inaccurate”.

Line chart of Share price (pence) showing Bridgepoint's stock value has risen sharply since flotation

In its IPO prospectus, the firm says it hasn’t disclosed these numbers because the carried interest payouts flow through a series of corporate entities known as “carried interest partnerships”, which Bridgepoint itself doesn’t control. 

But 10 such vehicles — only one of which is actually named in Bridgepoint’s prospectus — list Bridgepoint as a “person with significant control” at the UK’s Companies House, as DD’s Kaye Wiggins explains in this deep-dive

A person close to Bridgepoint said the reference to control in the prospectus was based on an accounting definition, which is separate from the Companies House regime, and that Bridgepoint doesn’t ultimately control the vehicles.

There are good reasons for other European private equity firms to seek a listing at the moment, not least because shares of listed buyout groups have soared. If senior figures’ worries about disclosing how much money they are personally making were putting them off, perhaps they might now move forward.

Line chart of Share prices rebased in local currency, Jan 2020 showing Share prices of listed private equity groups have soared

It also raises a question for policymakers and regulators, as the FT’s Helen Thomas writes: does keeping the full financial rewards of Bridgepoint’s top executives under wraps feel at odds with a system in which executive pay is both publicised and voted on by shareholders?

The big rush for healthcare M&A

It’s hard to overstate the magnitude of dealmaking this year. Overall, dealmaking activity is on the verge of hitting the $4tn mark, setting 2021 up to beat the all-time record of 2007, when a total of $4.3tn mergers and acquisitions were announced. 

Healthcare companies have been a particularly active part of the market.

The headquarters of Swedish Orphan Biovitrum (Sobi) in Solna, Sweden © Bloomberg

Two huge deals were announced on Thursday alone: in the US, medical technology group Baxter International took over its rival Hillrom for $12.4bn, and in Europe, private equity firm Advent International and Singapore’s sovereign wealth fund GIC teamed up to buy biotech company Swedish Orphan Biovitrum for about $8bn. (Lex investigates the latter here.)

DD’s James Fontanella-Khan reports that $570bn worth of deals have been agreed this year across healthcare, pharma and biotech — 5,316 transactions, to be precise. That’s a 148 per cent increase compared to 2020, and a record number of transactions since Refinitv started compiling the data in 1996.

Highlights include: 

What’s with the rush? 

Private equity firms, sitting on trillions of dollars of dry powder, have announced 8,967 deals since the beginning of January worth $760bn, an all-time high both in terms of number of transactions and overall value. The healthcare industry — particularly devices and services — has been especially appealing as valuations dropped sharply at the start of the pandemic. Since then they have picked up considerably, leading more buyers to chase assets. 

© AP

Another important driver has been historically low-interest rates, which make financing deals cheaper than ever. That could change, as central bankers around the world begin to consider raising interest rates, prompting some to speed up their deals before they become more expensive to carry out.

Finally, stock valuations in many industries are at all-time highs, leading companies to carry out all-stock transactions now before there’s a potential correction. 

The time to do deals is now. The question is, how long will it stay that way? 

Spacs book a one-way flight to Singapore

DD regulars have by now witnessed the turbulent journey of Spacs, aka special purpose acquisition companies, in the US. 

Things have been getting tougher, with regulators closing in and activity slowing (catch up on this “hangover” tale by DD’s Ortenca Aliaj if you missed it over the summer). Now a new option has emerged for blank-cheque companies and their sponsors: Singapore. The city-state has become the first big Asian financial hub to allow the investment vehicles to list.

Singapore Exchange’s move will be welcomed by both Spac sponsors and targets © Bloomberg

Singapore Exchange will welcome applications from Spacs globally as early as Friday, hoping it will help the Asian exchange make up for another dismal year of delistings driven by scarce liquidity and governance scandals. 

“We want the Spac process to result in good target companies listed on SGX, providing investors with more choice and opportunities,” said Tan Boon Gin, chief executive of the bourse’s regulatory arm, adding that safeguards will be put in place to protect retail investors.

Early in 2021 Spacs were the hottest item on Wall Street — eclipsing the $79.3bn they raised globally in 2020 in just the first three months of this year — until mounting regulatory scrutiny and lacklustre performance put a damper on investor enthusiasm. A series of lawsuits hasn’t helped to liven the mood.

That might make Singapore a more attractive option. So might the idea that regulators in the city-state have introduced a looser playbook likely to entice international sponsors, slicing their initially proposed minimum market capitalisation for Spacs in half to S$150m (US$111m) and removing limits on redemption rights.

Job moves

  • Michelle Hinchliffe, chair of KPMG’s UK audit division, has been appointed an independent director at miner BHP.

  • Edmond de Rothschild Asset Management has hired Caroline Gauthier as co-head of equities. She joins in Paris from Comitium, the Apax Partners subsidiary that she co-founded and led as deputy chief executive.

  • Latham & Watkins has hired three partners to join its new office in Austin, Texas: Samer Zabaneh and Jenifer Smith from DLA Piper, and Scott Craig from Wilson Sonsini.

Smart reads

Diversity disconnect Wall Street fronted billions of dollars to support racial equality. But the parade of corporate pledges to fight racism has cooled since last year, and new hires from historically Black institutions have struggled to move up the ladder. (Bloomberg)

The ‘Girlboss’ paradox Last year a number of female founder departures rocked the start-up world. Now the hard-charging “hustle culture”, in which the “girlboss” narrative rose to prominence, faces a reckoning as women reassess how to talk about ambition. (New York Magazine)

Digital deficit Japan is facing a severe shortage of tech workers as it confronts a stark gender gap in science education despite the country’s reputation as a global force for innovation. (New York Times)

News round-up

Advent and GIC offer $8bn to take Swedish biotech private (FT)

Wirecard-linked British businessman charged in Singapore over fake letter (FT)

JPMorgan to pay €25m to settle tax fraud case in France (FT)

WhatsApp fined €225m for not telling users how it shared data with Facebook (FT)

CMC Markets shares plunge after trading lull prompts profit warning (FT)

Germany’s Dax undergoes makeover as it expands from 30 to 40 (FT)

OnlyFans shows how the creator economy is shaping media (FT Opinion)

YouTube music services hit 50m subscribers in race to catch Spotify (FT)

Nomura: no smokes without firings is bad for cigarette industry (Lex)

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