Private Equity Embracing The Return Of The Quick Flip

By Marlene Givant Star and Harry Brumpton           When private equity giant Blackstone sold luxury hotel group Strategic Hotels & Resorts to Chinese insurance group Anbang for around $6.5 billion earlier this year, many observers took the deal as further evidence of China’s mad scramble for foreign assets, especially US real estate.

But the deal was also the start of another scramble that investment bankers across all sectors stateside have begun to notice: the return of the quick flip.

In Strategic Hotels’ case, Blackstone took the company private in December 2015 for about $6 billion, and then sold the group again in March – meaning the firm cleared about $500 million in something close to 12 weeks.

Private equity has long battled the caricature that they are mere speculators. As the industry has matured there has been ever more talk of more farsighted investment strategies. In February, for instance, The Carlyle Group announced it had raised more than $3.6 billion for a special long-dated fund aimed at holding companies for at least double the length of the rest of its conventional funds.

But Mergermarket data show the current market environment is making it hard to resist the option of a speedy – and relatively juicy — exit.

So far this year, 24 private equity firms have exited platforms after holding them for less than two years. In 2015, there were 46 such exits, a nearly 50% increase from 2014, when there were 33. Frequently, the portfolio companies in question were traded to other sponsors.

For example, Nautic Partners sold medical home care services company All Metro Health Care Services to One Equity Partners in February, after only 17 months. In August, Clearlake Capital sold Amquip Crane Rental to Apollo Global Management after only 19 months. Terms of both deals were not disclosed.