Ernst & Young IPO Insights IPO Market Open for Business
NEW YORK, June 24, 2013 /PRNewswire/ -- The following article is written by Jackie Kelley, Americas IPO Leader, Ernst & Young.
Improved investor confidence and higher valuations this quarter really opened the window for effective IPOs as well as encouraged new registrants into the pipeline. This quarter's results through June 14, 2013 have exceeded Q1 2013 by deal size and performance. New registrants, including confidential filings made public, were up 86% and IPOs that went effective were up by 45%. New registrant proceeds were up 189%, and proceeds from effective IPOs were up 38%. Even though Q2 has always been historically a strong quarter for IPOs in general, this second quarter has been more robust than expected. Despite recent market volatility, I am optimistic that the energy that has surrounded the markets will carry into Q3, and with Q4 also being historically strong, that should give us the momentum to end 2013 on a high note.
The number of new registrants into the pipeline is up from Q1. These companies are raising more capital and are strong candidates to go public in 2013 due to higher liquidity and valuations. Currently,14 IPOs are priced to raise more than $6.5 billion in the coming weeks. The strong U.S. IPO market also attracted foreign private issuers, (FPI). Twelve FPIs filed for IPOs in Q2 compared to six in Q1 and two in Q4 2012.
IPOs backed by private equity, (PE), and Venture Capital (VC) firms represent 52% of the deals in Q2. In fact, 7 of the top 10 deals in 2013 were PE backed, a function of PE looking to make exits from investments at the beginning of the recession. So far this year, PE firms have spent $35.9 billion in Technology sector deals, making it the second most active by value. Consumer products is the most active sector this year by value, with 61 deals with a combined value of $42.3 billion. Moreover, retail investments have attracted another $7.9 billion. Collectively, they account for nearly 40% of total PE spend year-to-date.
Confidence in the markets has given encouragement to companies across a diverse mix of sectors to take advantage of an IPO. A few trends include the re-emergence of the Life Sciences sector which had been quiet for some time. Earlier stage bio-pharma companies are taking advantage of the capital markets as they have been able to raise a good amount of capital. Because of the JOBS Act they are considered emerging growth companies-and many are taking advantage of the opportunities the legislation allows. In the U.S, Health care is dominating with Financials- a mix of banks, financial services and brokerage firms-coming in at a close second. Rounding out the top four sectors is Technology and Real Estate. Technology is a fast growing sector with companies still trying to position themselves for changes the cloud and mobility have brought about. The real estate market continues to be on an upswing in the U.S.and Canada.
Recently, we've seen an increase in market volatility. However, investors are out there looking for competitive pricing, the right management team to instill confidence, and a good company story. The window of opportunity can open and shut at a moment's notice, but I expect we'll see continued IPO activity in the second half of the year.
SOURCE Ernst & Young