Fidelity, KKR tie up to leverage IPO market

08 June 2009

Boston-based Fidelity Investments and private equity firm Kohlberg Kravis Roberts (KKR) have entered into a partnership, under which clients of Fidelity Investments will gain access to stock offerings, including initial public offerings, by companies owned by the latter.

The deal comes in the wake of some recent IPO successes which include IPOs of OpenTable and SolarWinds. With the success of these the IPO market which seemed to have dried up seems to be in a revival mode. IPOs of companies owned by private equity firms had been especially hard hit in the absence of such demand as they have limited options for cashing out their investments.

According to Mark Haggerty of Fidelity Capital Markets, there are some signs of the market opening up, but he said the great thing from their perspective was that by getting the alliance in place, the company would be ready when it did come.

KKR was established in 1976 by Henry Kravis and George Roberts and is seeking avenues beyond leveraged buyouts, with deal making hit by the global recession and banks' unwillingness to lend. 

The firm's capital-markets unit Craig Farr has underwritten debt and equity offerings for holdings, including software maker SunGar Data Systems Inc. 

The agreement would enable the mutual fund firm's retail and institution brokerage clients to buy IPOs while KKR's capital market business will gain access to a distribution channel, according to analysts.