No private equity investor wants to hold its portflio companies indefinitely, so it should be no surprise that Madison Dearborn Partners would look to sell their stake in Nuveen Investments [profile] at some point. What would be news is the timing. Don't be surprised if that time is soon.

In recent months sources both within and without Nuveen have taken it as accepted wisdom that an IPO is in the planning stages, though the specific timing will depend on Mr. Market's appetite for a deal.

It's been six years since the Chicago-based Madison Dearborn took Nuveen, (also of the Windy City) private in an LBO in June 2007.

That means that last month was the sixth anniversary of the deal, Madison Dearborn's investors must be itching for a little IPO action as the general rule is that investors start to seek ways to cash out after roughly three to five years (of course, that rule is not a hard and fast one).

Deals in the industry are coming quickly. A glance at MFWire's deal sheet page, shows that the industry hasn't exactly been quiet on the deal's front with 10 deals so far in 2013.

Meanwhile, Crestview (another private equity firm) is looking to cash out from its investment in Munder Capital.

A big concern for Madison Dearborn is likely to be the price it can get for Nuveen.

When Madison Dearborn took Nuveen private in 2007, it paid $5.75 billion, or $65 per outstanding share. That translates into a 20 percent premium over what the Nuveen shares was changing hands the day prior.

Madison Dearborn also assumed $550 million of Nuveen debt, bringing the deal's total to $6.3 billion.

What can Nuveen fetch now? Well, Mr. Market has been remarkably fickle this year when it comes to asset managers.

Take, Artisan's March IPO. That deal raised $332 million through the sale of 11.1 million shares at $30 per share. The fact that the shares priced above the the $27 to $29 per share range initially proposed by the underwriters and that the shares have risen smartly since could be seen as showing that Mr. Market does have an appetite for shares in mutual fund sponsors. At the close of the March 7 IPO, Artisan ended at $38.93, nearly 30 percent more than the $30 IPO price.

The $38.93 price translates into a market cap to AUM ratio of 3.25 percent.

On the other end of the spectrum is the ING IPO in May, which opened at $19.25, down 25 cents from the initial IPO price of $19.50 and closed at $20.84.

That IPO, during which ING's Dutch parent ING Groep sold 25 percent of its stake, raised $1.27 billion.

That would translate into a full market cap of roughly $5 billion. Divide that figure by the $481 billion of AUM that ING managed in the first quarter of 2013, and you get just over one percent of AUM.

A one percent pricing ratio would translate into just $2.25 billion -- far under what Madison paid in 2007.

A 3.25 percent pricing ratio would translate into just under $7.30 billion -- or a 15 percent premium over Madison's investment.

The above, of course, would be the main drivers for a liquidity event. But other factors could be at play.

The Teamsters have criticized Nuveen's debt. The asset manager levered up with more than $3.1 billion in debt as part of the 2007 buyout. The Teamsters also noted that Nuveen has had three billion dollar refinancing deals in the past three years.

Are these strategic moves to take advantage of lower interest rates, or was the deal overly leveraged? If the former, Madison may not be in a hurry to get to liquidity. If the latter, well, you can guess the excitement.

Another factor to consider: How are Madison Dearborn's investors doing? Bloomberg reported in January that Madison returned a record $3.3 billion to clients in 2012, surpassing its previous peak in 2011 of close to $2 billion, according to a letter obtained by Bloomberg. Are Madison Dearborn's limited partners satiated, or has boon made them hungry for more?

Does Nuveen have to go the IPO route to cash out?

It's important to note that for a number of years, Nuveen has been filing a document, the Form D, with the SEC.

Nuveen has filed this document at least three years: in 2009, 2011, and 2012, as well as the amended Form D/A version four years in a row: 2013, 2012, 2011, and 2010.

The Form D allows companies to "offer and sell securities without having to register the offering with the SEC."

Could this allow Madison Dearborn's partners to generate the liquidity they need?

It's possible, but the form can allow for a variety of things, says John Guest of the law firm McCarter & English.

This is what he had to say on the subject:

This form is filed with the SEC by companies (referred to as "issuers" by securities lawyers) who conduct a private placement of securities when taking advantage of Regulation D exemption from the requirement to register the offer and sale is securities (eg, stock). Reg. D when complied with affords a safe harbor from the registration requirement. Form D is a notice filing that simply Reports to the SEC that the placement had occurred or will occur. It says nothing more about an issuer's capital raising intentions and should no be interpreted as a signal that a company intends to undertake a public offering,eg an IPO.

It's important to note that the market has gone up since both IPOs, so there may be even more appetite for shares.

Admittedly though, there are many factors we don't know regarding this ongoing deal, but the question still needs to be asked: What's holding up a Nuveen IPO? 

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