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Average Holding Period for Buyouts and Public to Private Deals Exited Since 2006

The time period between the initial investment in a company and the date of exit, otherwise known as the holding period, varies greatly between portfolio companies. The average holding period for investments exited since 2006 is around 4.1 years; however this has fluctuated significantly between 2006 and 2011.

The average holding period for buyout deals exited in 2006 was close to 4.2 years. This fell to 3.9 years for companies exited in 2008, before rising sharply to 4.8 years in 2011. Public to private deals have shown even greater variation in holding periods, falling from 3.6 years in 2006 to 3.2 years in 2008, and peaking at 4.9 years in 2010. Whilst the combined average holding period for deals exited in 2006 was 4.1 years, the figure surpassed 4.7 years in 2010 and 2011, indicating fund managers’ reluctance to exit their boom-era investments in the immediate post-Lehman era.

Although holding periods tend to be between three and five years, there have been examples of far more long and short-term investments. In May 2011, Kohlberg Kravis Roberts exited their stake in Primedia (formerly K-III Communications) in a $525 million sale to TPG Capital. KKR originally formed Primedia in 1989 in order to acquire print media assets and at 22 years, this is KKR’s longest ever holding of a portfolio company.

In stark contrast, Castle Harlan recently held a portfolio company for less than one day. On Wednesday 7th July 2011, the private equity firm acquired Norcast Wear Solutions for $190 million and, within seven hours of the deal, agreed to sell the company to Bradken Ltd for $217 million.

Posted by Jonathan Parker on 25-Aug-2011

Keywords: deals, private equity, buyout, holding periods