Dual tracks are back on the starting grid! With IPOs gaining momentum, and M&A processes stalling, are we at a tipping point? Louise Pritchard and Nick Pearey explore how dual tracks could accelerate in the coming months and why they might be the ultimate exit strategy to get you past the chequered flag.
Louise Pritchard: Whilst Formula 1 might have been hitting the headlines this summer, it's dual tracks which are gearing up in the corporate finance world. Hi I'm Louise Pritchard.
Nick Pearey: And I'm Nick Pearey. Welcome back to Mergerspresso, AG's corporate finance soundbite. All you need to know on one topic, in the time it takes to make your coffee.
Louise Pritchard: So Nick… what are dual tracks?
Nick Pearey: Dual tracks. They're well established aren't they and are there to help sellers maximise exit price and provide optionality. Simply put, two processes run side by side: a private M&A sale process often an auction and an IPO. The IPO effectively acts as another bidder, both increasing competitive tension and thus maximising value. So Louise what's the outlook for the IPO alternative?
Louise Pritchard: Well Nick, I think we will all agree, that in recent years the IPO alternative has been a pretty lame stalking horse. And let’s not forget that IPO preparation is both costly and resource intensive and so not to be taken too lightly. But as European capital markets strengthen there is genuine belief that this Autumn could finally see the IPO market open and therefore think we can increasingly see the IPO alternative becoming a real and serious threat to bust auction processes.
Nick Pearey: Yes I agree with that Louise. I think also two other points that debt is still challenging to raise in this current market. Furthermore we've seen several cycles of sponsors selling assets to one another - even resorting to continuation funds. In fact, the latest figures suggest that $41bn of assets have been sold by Private Equity to continuation funds just in the first half of this year, 2025.
Louise Pritchard: Wow, that's significant and I'm sure that most of our PE colleagues will say that continuation funds will have their use in specific cases. However, we are seeing markets hit record highs with urgency around deploying capital, a couple of successful IPO exits this Autumn are all the markets really need.
Nick Pearey: Yes, so with the right tailwinds, a bit of DRS, apparently that’s Formula 1 is that right? And some fast work in the pitlane, we see a re-emergence for dual tracks on the horizon.
Louise Pritchard: We'd love to hear your thoughts, though. Do you like us see dual tracks gearing up for a return? That's all from us today, thanks for listening.
