Private-equity firms are struggling to find buyers for their portfolio companies, but a hot market for IPOs is giving them another way out.
More sponsors are considering taking their portfolio companies public, an exit route that is often a fallback option. Firms generally dislike the messy, prolonged mechanics of exiting the investment, along with the risk of falling share prices.
Now that path is looking a lot more attractive, especially with firms under pressure to deliver payouts to institutional and wealthy investors, also known as limited partners.
While the June offering of Elon Musk's SpaceX grabbed the biggest headlines, the broader IPO market is heating back up after a mostly quiet stretch, driven by demand in industries such as artificial intelligence, aerospace and defense. A range of private equity-owned companies have gone public lately too, including Jersey Mike's, apparel brand Reformation and data-center company Csquare.
"Now that the public markets are finally open, private-equity firms are more than happy. If their company's ready to go, they'll do it," said Sash Rentala, head of financial sponsors at investment bank Solomon Partners.
There have been 21 U.S.-listed IPOs of private equity-backed companies this year through Aug. 5, the most since 2021, according to Dealogic. That compares with 20 in all of 2025 and 16 the year before. Blackstone President Jonathan Gray declared 2026 the "year of the IPO" on the firm's earnings call earlier this year.
An IPO doesn't mean the firm cashes out on opening day. Underwriters mandate lockup periods, meaning it takes a minimum of six months, and often years, for the sponsor to fully sell down their shares. Still, it is a way to deliver returns to investors.
Private-equity firm Madison Dearborn took defense contractor Aevex public at a valuation of more than $2 billion in April after deciding not to go ahead with plans for a private sale. The firm, which bought Aevex in 2020, hired Jefferies in late 2023 to solicit bids for sale, a person familiar with the matter said, but a deal never materialized.
Staying on as an investor in a public company means being subject to the whims of the stock market. Jersey Mike's, which Blackstone took public after 18 months of majority ownership, had a bumpy debut last week, with shares falling 6% on its first day on the New York Stock Exchange.
"They'd still always prefer an M&A exit to the extent that they can find one, but IPO has become more of a viable option given the IPO market this year," Eric Juergens, a partner at law firm Debevoise & Plimpton, said about firms generally. "I'm not sure it'll ever be the No. 1 option."
About 1% of private-equity exits have occurred through U.S. public listings since the beginning of 2022, based on the number of exits, according to data from Jay Ritter, director of the University of Florida's IPO initiative.
"I would say that IPOs historically probably haven't been the most preferred path for private equity," Josh Smigel, U.S. private-equity leader at accounting firm PricewaterhouseCoopers, told reporters in June. But now, he said, "IPOs are more on the table than they have ever been...as another lever to create liquidity for LPs."
IPOs are frequently part of a dual-track process where a firm prepares paperwork for an offering while simultaneously running a private-sale process, in some cases to help drive up the private-sale price, lawyers said.
Firms also weigh continuation vehicles, secondary deals, shifting from fund to fund and creative solutions to provide liquidity to investors.
Clarios, a car-battery maker backed by Brookfield, last year scrapped plans for a U.S. IPO that it initially filed for in 2021, citing market volatility. It chose instead to raise billions in debt to fund payouts to its owners.
Comments