About Euronext Offerings
The line between the public and private equity markets was further blurred when KKR Private Equity Investors, L.P., a Guernsey limited partnership, debuted its investment vehicle, on Euronext's Amsterdam exchange in a $5 billion IPO. In the wake of the KKR IPO, several private equity firms, including Apollo Management, Blackstone Group, Carlyle and Texas Pacific Group, have reportedly begun discussions with investment bankers to form similar foreign investment vehicles.
Private equity firms will seek to form entities and list securities in foreign markets taking advantage of the less regulated business environments that such markets offer as compared to that of the United States. For example, by listing on Euronext's Amsterdam exchange, KKR was able to avoid compliance under both the U.S. Investment Company Act of 1940, as amended (the Investment Company Act), and the Sarbanes-Oxley Act of 2002, while taking advantage of the comparatively looser regulatory and governance requirements of Euronext's Amsterdam exchange.
Companies choosing to follow the Euronext model will similarly seek to insulate themselves from U.S. compliance regimes under the Securities Act of 1933, as amended (the Securities Act), and the Investment Company Act. Again using the recent KKR transaction as an example, it was able to achieve this by limiting flow of its investment vehicle's securities in the U.S. to a private placement to certain qualified institutional buyers and by restricting the transfer of the such securities in the U.S. to certain qualified purchasers. The firm also required that any U.S. person, or person within the U.S. who is not a qualified purchaser and who acquires the investment vehicle’s securities, must immediately transfer the securities to a qualified purchaser or to a non-U.S. person in an offshore transaction reserving the right to force a transfer itself if the requirement is not met.
An emphasis continues to be placed on speed-to-market. As use of the new Euronext model becomes more routine, it is possible that companies may be able to go to market within a matter of months.
Many question what impact the Euronext model will have going forward, whether the U.S. will lose investment vehicles to foreign markets, or if this is the beginning of another rush to market like the BDC rush that captured many private equity firms in 2004. There are not clear indicators at this time. Ultimately, the foreign public markets will determine the future and sustainability of the newest phenomena.
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