Private-equity firms put brakes on stock offerings

— -- Some barbarians are having a tougher time getting out of the gate than they had getting in.

Private-equity firms, investment firms that buy companies, revamp them and quickly resell them for a profit, were some of the most active dealmakers the past few years as they bought and then sold companies. But lately, private-equity firms — known in the 1980s as leveraged-buyout firms — are having a tougher time unloading some of their acquisitions.

Since Labor Day, usually the unofficial return of the IPO, or initial public offering, market from the summer lull, not one private-equity-backed IPO has been completed, says Francis Gaskins of IPOdesktop.com.

And four private-equity-backed deals were postponed or withdrawn since Labor Day: marketer Affinion, insurance distributor AmWins, benefit-plan administrator CompBenefits and business services company Merrill.

Those accounted for half of all the postponed or delayed IPOs.

"The bubble has burst for the private-equity guys," Gaskins says. "The party may be over."

This is happening even as the overall IPO market is performing well and on pace to be the busiest year since the dot-com boom of 2000, says Kathleen Smith of Renaissance Capital. Since Labor Day, 11 IPOs have been completed, bringing 2007's total to 161. At the same time in 2006 — a year in which 198 IPOs were completed — only 126 offerings had been done.

Analysts say private-equity-backed IPOs have fallen out of favor because investors:

•Question whether these companies can perform well amid higher borrowing costs. Private-equity firms have largely relied on borrowing money at low interest rates, Gaskins says. But after the credit problems in August and September, the companies have to pay higher interest rates to get new money, which threatens to boost their debt costs, he says.

•Don't just want companies that rely on cost cutting for improved returns. Investors want companies that are growing by selling new products and services, not those that have undergone "financial engineering," Smith says.