Small Companies Lead IPO Pipeline as Busy IPO Market Eases Pipeline Pressure, According to Ernst & Young LLP

NEW YORK, Feb. 3, 2011 /PRNewswire/ -- The IPO pipeline had 121 companies in registration at the end of Q4 2010, representing $23.1 billion and the most quarterly activity of 2010.  

As 56 new companies joined the pipeline, another 57 registrants launched their IPOs and 14 withdrew their offerings from the pipeline. Comparatively, in Q3, 33 companies went public. This pace – almost equal amounts of companies registering to go public as are actually going public – reflects a renewed level of momentum in the marketplace.

The high level of activity was driven by smaller companies registered and registering, reflecting two trends: strong interest from private equity and venture capital firms in rolling out their holdings, and strong market appetite for growth companies.  

Average deal size decreased by 3% to $191 million from $198 million last quarter. Two thirds (75 registrants) were seeking $100 million or less at the end of Q4, more than the 70 registrations in Q3 and 59 registrations in Q2 at that level.  

As with Q3, 19 of the companies registered to go public are from foreign countries. Most were from China, with 16 companies registered, including five new registrants in Q4.  All but one of the China-based companies in the pipeline filed to raise $50 million or less.

"Last quarter's surge in China-based registrants met a receptive market, as 20 of them went public," says Maria Pinelli, Americas Director, Strategic Growth Markets, Ernst & Young LLP.  "The pipeline now includes China-based companies from almost every industry, from mining to retail to pharma. Additionally, Chinese companies are coming to market quickly, taking an average of 42 days last quarter from registration to launch.  Comparatively, the average company in the pipeline last quarter took 96 days from registration to launch."

The largest registrant in the Pipeline is provider care company HCA Holdings Inc, at $4.6 billion, followed by media and entertainment firm Nielson Holdings B.V. at $1.75 billion, and newly registered oil and gas company Kinder Morgan at $1.5 billion.

"Technology leads the pipeline with 25 deals seeking a total of $2.5 billion – an average deal size of $100.1 million," says Jackie Kelley, Americas IPO Leader, Ernst & Young LLP.  "Tech companies are supported by private equity and venture capital firms, which are interested in rolling out mature, prepared investments and rejuvenating their portfolios."

Among technology deals, 15 were newly registered, 10 went effective and two were withdrawn during Q4. Oil & Gas companies represented three of the top five new entrants into the pipeline, seeking $2.6 billion collectively. Other active industries in the pipeline include:  17 pharmaceutical companies (seeking $1.5 billion) and 12 professional services companies (seeking $1.4 billion).  

Regionally, California continues to lead deal volume with 22 companies seeking $2.1 billion, followed by China with 16 companies seeking $417.6 million, and Texas and Florida, both with nine companies seeking $3.0 billion and $1.9 billion respectively.  

The Ernst & Young LLP U.S. IPO Pipeline analysis is issued quarterly as a forward-looking indicator of the IPO market.  The IPO Pipeline data is refined to eliminate bias from financial services organizations, real estate investment trusts and other holding companies that represent assets under management instead of core businesses.  It also eliminates any registrants sitting on the books for more than 12 months – long-term applicants that may bloat numbers, but don't reflect current market trends.  

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SOURCE Ernst & Young LLP