To Exit or Not Exit - That is The Question
If a picture is worth a thousand words, limited partners will want to ask general partners a lot of questions about projected exits. According to "VC exits still not a pretty picture" (TheDeal.com - January 4, 2010), a dearth of liquidity events in 2008 and early 2009 cast a pallor over the private markets, depressing M&A activity and creating angst for anyone in search of cold hard cash.
The tide may be turning if late 2009 activity is a bellwether for 2010 initial public offering ("IPO") volume. Reporter Cara Garretson describes research conducted by Thomson Reuters and the National Venture Capital Association that hints at a recovery, albeit modest by historical comparisons. With 67 mergers and acquisitions and 5 IPOs for venture-backed firms in Q4-2009, coupled with at least 29 companies that have filed with the U.S. Securities and Exchange Commission to go public, life may be sweet indeed for some. (See "IPO, Acquisition Activity Raises Hopes for 2010," CIOZone.com, January 4, 2010).
Closer to home, Financial Engines has signaled its intent to raise $100 million by selling stock to the public at large. Self-described as a "leading provider of independent, technology-enabled portfolio management services, investment advice and retirement help to participants in employer-sponsors defined contribution retirement plans," this California company received private market monies from giants such as New Enterprise Associates and Oka Hill Capital Partners. (See "Financial Engines Inc files for $100 min IPO" by Clare Baldwin, Reuters, December 9, 2009.) A brainchild of Nobel prize winner Dr. William Sharpe, Financial Engines recently claimed $25 billion in managed accounts and nearly 400,000 participants.
For those in the investment industry, the Financial Engines S1 filing with the U.S. Securities and Exchange Commission makes for interesting reading. Cited risk factors include:
- "Decline or slowdown of the growth in the value of financial market assets" which reduce revenues related to management
- "Negative public perception and regulation of the financial services industry"
- Elimination or decrease of sponsor 401(k) matches which could lower assets under management
- Pressure to reduce fees charged for "portfolio management, investment advisory and retirement planning services"
- New regulations that impact any organization that offers subadvisory work, etc.
Later pages of the Financial Engines regulatory report offer insight about the growth potential for those seeking to expand their presence as part of the U.S retirement savings industry. The commentary includes reasons why management account business is likely to grow.
Stay tuned for what could be a watershed year in terms of public filing reversals.
