Inside the Fortress
Thu Feb 1, 2007
The Fortress IPO is a gamble on the continued growth of hedge funds and, more importantly, private equity. With a multiple in the high 30s, the Fortress principals will rake in the bucks – and offload risk to new shareholders while maintaining control through a complicated new structure. What’s not to like?
The IPO will shower riches on its trendsetting principals,
but is it a good model?
When rumors surfaced last May that Fortress
Investment Group was considering an initial public offering, it
seemed an outside possibility. Equity markets were tanking
around the world, and the private equity, real estate and
credit markets that dominate Fortress's alternatives business
were looking a little precarious.
But by November 8, the date Fortress registered with the
U.S. Securities and Exchange Commission to sell a 10% slice of
a newly created holding company, the storm appeared to have
passed - at least for the moment. How else to account for the
wild multiple Fortress hoped to get in selling its stake for
$750 million? That's a $7.5 billion valuation for the
eight-year-old company - 37 times 2005 pretax income, more than
double what some other hedge fund managers had been told to
expect in a sale....
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