In another sign that capital markets are improving – and it’s not just tech companies that are benefiting – Dunkin’ Donuts went public today. According to the Wall Street Journal article, Dunkin’ Brands Group Inc., the parent company of Dunkin Donuts, priced its shares at $19 a share and raised $427.5 million. All of you who are Dunkin’ Donut fans, or are fans of their coffee which apparently now contributes over half of their sales, can now expect to see more Dunkin’ Donuts shops as the funds will be used to fuel expansion and pay down debt.
I’m also mentioning this IPO because, according to the WSJ article, Dunkin’ Brands is owned by private equity firms Bain Capital Partners LLC., Carlyle Group and Thomas H. Lee Partners, which bought it in 2006.” The article goes on to say, “They will maintain a controlling interest; about 20% of the shares outstanding are being floated.” This IPO gives the private equity firms who bought the company a liquidity event or an exit (or partial exit, in this case) in five years, well within the 5 – 7 year typical exit period. It is true that these particular private equity firms, as seems to be the case now and in the last several years with large private equity firms, took on large amounts of debt in order to obtain the cash to provide them with large dividend distributions in the early years after the acquisition finalized. So there has been one or more liquidity events already. However, to completely exit their equity ownership positions they’d either have to sell to another entity (another company or private equity firm) or take the company public. And private equity firms, like venture capitalists, always like having the option of an IPO, whether or not they use it, because it increases the options and raises the value.
Just another thought in my continuing focus on the increasing activity by equity investors.