First Quarter 2011 U.S. IPO Proceeds Skyrocket 194%, Driven by Billion Dollar Deals and Financial Sponsor-Backed IPOs, According to PwC

NEW YORK, April 5, 2011 /PRNewswire/ -- Continuing momentum from 2010, first quarter 2011 IPO proceeds reached $12.4 billion, the highest first quarterly value since 2008.  When excluding the $17.8 billion Visa IPO in 2008, the largest IPO in U.S. history, the first quarter 2011 generated the highest first quarter proceeds since 2000.  The 194 percent increase in offering proceeds over first quarter 2010 was driven by the return of large financial sponsor-backed offerings.  The strong first quarter performance puts the U.S. IPO market on pace to eclipse the full year 2010 proceeds of $39 billion, according to US IPO Watch, PwC's quarterly and annual analysis of IPOs on U.S. stock exchanges.

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During the first three months of 2011, total IPO proceeds increased to $12.4 billion from $4.2 billion in the comparative 2010 period.  The first quarter also witnessed a small increase in deal volume to 32 offerings from 29 offerings in 2010.  The month of February alone significantly contributed to the strong quarter in terms of both volume and value with 17 IPOs raising $4.1 billion – close to the total amount of proceeds raised during the entire first quarter of 2010.

"This is one of the best first quarters we've seen in years, demonstrating the increasing attractiveness of the U.S. IPO markets for generating capital and providing liquidity for financial sponsors," said Henri Leveque, Partner and leader of PwC's Accounting Advisory practice.  "Based on the first quarter results and insights into the deal pipeline, we are optimistic that the momentum will continue for the remainder of the year and potential issuers will look to capitalize on the rebounding IPO market."

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In the first quarter, there were three offerings which generated proceeds of over $1 billion, and all were private equity backed offerings (HCA Holdings Inc. $3.8 billion; Kinder Morgan, Inc. $2.9 billion; and Nielsen Holdings N.V. $1.6 billion), compared with only one billion-dollar IPO in 2010 (General Motors Company's $15.8 billion offering, the second-largest U.S. IPO in history).  Average deal size increased 166 percent to $387.8 million in the first quarter 2011 from $145.7 million in 2010, signaling a growing trend of larger deals and increased optimism in the IPO markets.

"These large private equity-backed offerings were long-awaited and we anticipate that the completion of such offerings in the first quarter will increase interest by financial sponsors pursuing IPO exits," said Neil Dhar, a Partner in PwC's Transaction Services practice who specializes in IPOs.  "We saw a record number of buyouts from 2005 to 2007, and as these companies look to deleverage, we anticipate an increase in offerings dual-tracked with M&A transactions."

PwC is seeing this trend continue with another 52 companies entering the IPO registration process in the first quarter, increasing an already robust IPO pipeline.  Postponed or delayed IPOs also declined, with only one company pulling a planned offering during the first quarter, indicating that companies in the pipeline are continuing to see interest initial public offerings.  Recent global events have not had a dramatic impact on U.S. capital markets, but short-term volatility could arise as a result of the impact on the global macroeconomic climate.

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Financial sponsor-backed IPOs continued their leadership of the U.S. IPO market during the first quarter, generating $11.6 billion in proceeds with 24 of the quarter's 32 total IPOs, representing 75 percent of total volume and 94 percent of total value.  By comparison, while financial sponsors contributed approximately the same number of deals in the first quarter of 2010 with 22 of the 29 total IPOs raising $3.1 billion, total proceeds raised by financial sponsors represents a 273 percent uptick in 2011, indicating increased confidence by such sponsors in bringing larger offerings to the U.S. IPO market.  

"Private equity and venture capital firms continue to use the U.S. IPO market as a strategic avenue for exit.  Financial sponsors have also been very active in M&A and driving interest in alternative equity offerings such as those that have generated a lot of attention around high-profile private technology companies," continued PwC's Dhar.  "While each of these roads has its opportunities and challenges, the same deep level of diligence and planning is required to understand the risk and rewards for any potential capital raising activity."

Foreign private issuers (non-U.S.) showed steady activity in the U.S. IPO market during the first quarter, with relatively flat volume and value year over year.  Non-U.S. issuers contributed 11 IPOs raising $1.4 billion in Q1 2011, compared with eight offerings raising $1.3 billion during the same period in 2010.  China continues to lead among foreign private issuers, contributing six IPOs generating proceeds of $353.1 million, compared to five IPOs that raised $335.9 million over in the same period last year.  Other non-U.S. issued IPOs in the first quarter of 2011 came from Luxembourg, the Netherlands and Ireland.

In terms of volume, three industry sectors – healthcare, technology and business services – dominated the majority of IPO activity, compared to the broader diversification across all industry segments in the first quarter 2010.

During the quarter, the NYSE and NASDAQ contributed 15 and 17 offerings respectively, with the largest offerings being on the NYSE, which contributed $11.2 billion of total first quarter proceeds.

"While we're off to a very strong start in 2011, companies looking to access the capital markets through an IPO should not fall into a false sense of security," cautioned PwC's Leveque.  "Preparing to be a public company is more than just a one day event.  The process requires intense, long-term planning and execution to avoid the many potential pitfalls that come with the responsibility of transitioning to a public entity.  The markets are still in recovery mode and short-term volatility will continue to challenge new issuers if they're not thoroughly prepared to take advantage of the window of opportunity."

PwC's US IPO Watch is a quarterly and annual survey of IPOs listed on U.S. stock exchanges.  These include IPOs by domestic and foreign companies, best-efforts, business development companies, filings with the FDIC, and bank demutualizations.  IPOs do not include unit investment trusts and fully classified closed-end funds.  Visit our website, www.pwc.com/us/ipo, for the newly-released annual 2010 US IPO Watch and information about PwC's IPO Services.

PwC's Transaction Services practice provides due diligence on both the buy and sell sides of a deal, along with advice on M&A strategy, valuation, accounting, financial reporting and capital raising. For companies in distressed situations, we advise on crisis avoidance, financial and operational restructuring and bankruptcy. With approximately 1,000 deal professionals in 16 cities in the United States and a global network of over 6,000 deal professionals in 90 countries, PwC deploys experienced teams with deep industry and local-market knowledge, and technical experience tailored to each client's situation. Our field-proven, globally consistent, controlled deal process helps minimize their risks, progress with the right deals, and capture value both at the deal table and after the deal closes. For more information about M&A and related PwC services, please visit: www.pwc.com/ustransactionservices.  

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SOURCE PwC