Private equity groups needing exits will have to leave more on the table for shareholders when they float portfolio companies to overcome investor scepticism resulting from IPOs like Debenhams.

While TPG made some 500 million pounds from its investment in the British retailer, shareholders who bought in to its flotation in 2006 have seen the value of their holdings more than halved in just over three years.

Times have since changed for private equity players and a Debenhams type flip would be a hard trick to pull off again, but investors must make sure private equity firms don’t leave them holding the baby in the next round of private-to-public IPOs.

Not only must they demand more favourable pricing, but also lock-ins for the PE firms. They should also make sure that companies are less highly geared at flotation, ensuring that the PE players limit their returns ahead of this.

In the case of Debenhams, shareholders should have seen the writing on the wall. After all, when you buy into an IPO involving private equity there is always a PE group seeking to get out and maximise its profit. Often, as in the case of TPG and Debenhams, they have already banked their return.

For TPG, the sale this week of its 9 percent stake was the icing on the cake. While TPG got out at 81.6 pence per share — a far cry from the 195 pence Debenhams shares were worth at flotation — it still netted 100 million pounds ($164 million).

TPG has had only upside from its 2003 investment. No such luck for the shareholders who bought in at the IPO price. It was a leading partner in the original 1.7 billion pound investment, when along with CVC and Merrill Lynch it invested just 600 million pounds in equity.

The trio then geared up Debenhams to finance an 800 million pound pay-out and took out a further 200 million pounds in dividends. This more than repaid the initial investment but left the retailer with some 2 billion pounds in debt which it has since been working to pay off.

With private equity firms including Blackstone and Permira now queuing up to float some of their companies, investors should examine carefully exactly what it is they are getting. And private equity firms must — as Warren Buffett would say — have a real skin in the game post-IPO as well as before.