Alarm IPO will give buyout barons peace of mind

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By Jennifer Johnson Verisure effectively sells its customers the ability to sleep easy at night. The home security firm's forthcoming initial public offering should do the same for buyout barons mulling how to get rid of trillions of stuck assets. The group, majority‑owned by the private equity firm Hellman & Friedman, aims to raise over 3 billion euros via a float on the Nasdaq Sweden this week. Its IPO discount looks modest, which is good news for other hopefuls.The Stockholm-based company's core business, providing alarms and monitoring systems to households and small firms, appears stable. Its adjusted operating profit grew at a rate of around 20% annually between 2022 and 2024, while Verisure claims its average customer lifetime is an impressive 15 years. Would-be investors seem enthused. Bloomberg reported on Monday that the float was likely to price at around 13.25 euros per share, which would be near the top end of its previously stated range of 12.25 euros to 13.50 euros apiece.That would value the business at around 18.5 billion euros ($21.6 billion), including just under 5 billion in net debt. Listed comparators are difficult to come by. But a person familiar with the matter told Breakingviews that investors have been looking at a cohort of European business-services firms, like Experian LSE:EXPN and Diploma. Serial acquirers in the Nordic region – such as Indutrade OMXSTO:INDT, Lagercrantz OMXSTO:LAGR_B and Addtech OMXSTO:ADDT_B – are also in the mix.The services players tend to trade at 19 to 21 times 12-month forward operating profit. The Nordic compounders, meanwhile, are generally valued in the low-to-mid 20s, on the same basis. Verisure's adjusted operating profit for the last 12 months was around 875 million euros. Assume 20% year-on-year growth, which is roughly in line with historic rates, and the implied forward 12-month number would be just under 1.1 billion euros. It follows that an 18.5 billion euro enterprise value would be equivalent to a multiple of 17.6, which imputes a minimal 12% discount relative to the rough 20-times midpoint rating for business-services peers.At first glance, that might not seem like anything to write home about. But IPO discounts are often much bigger, reaching 20% or more in the United States, for example. The takeaway is that buyout barons looking to float rock-solid assets should be able to do so witho...

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