An article in the New York Times reports that Silver Lake Partners has quietly cashed out its investment in leading expert network Gerson Lehrman Group. The move signals that an IPO is not imminent for GLG.
After exploring various options, GLG reportedly secured a $250 million line of credit from a group of banks led by Silicon Valley Bank, reportedly a $50 million profit on Silver Lake’s original $200 million investment.
Silver Lake purchased a 25% stake in GLG at the end of 2007, when GLG’s revenues were at $220 million. Bessemer Venture Partners, which led an early investment round in 2004 with an investment of $20 million, is still in.
The NY Times article cites the Martoma insider trading case as having dimmed hopes for a GLG IPO because both Martoma and his source used GLG, although they were careful to pass inside information in separate conversations not arranged by GLG.
It also plays up GLG’s attempt to reposition itself away from an expert network, a makeover we noted over a year ago.
So much for our expectation that GLG might float an IPO sometime soon. We view Martoma’s case as having validated GLG’s compliance platform since both parties went to great lengths to avoid GLG when passing material non-public information. Apparently, the risks associated with the expert network business are still viewed as an obstacle to a successful IPO.
The negativity is ironic because GLG’s business is more robust than ever. GLG’s revenues plunged in 2010 as the insider trading scandal broke, but began to recover the following year as it picked up market share from smaller expert networks. We estimate it regained its previous high in 2013 and has been setting new revenue records since, as the expert network industry has entered a new boom period.
Despite GLG’s success in weathering the insider trading storm, Silver Lake’s exit suggests that an IPO is not imminent. Longstanding investor Bessemer Venture Partners is keeping the faith, however, and is likely to be well rewarded for its patience.