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Driven by an extremely active second quarter, which featured 61 offerings, the U.S. IPO market is up 26 percent from last year and is off to its best year since 2007. Proceeds on U.S. exchanges are actually down from the first six months of 2012, but this is an anomaly of last year’s $16 billion Facebook IPO, which generated 56 percent of last year’s first half proceeds. If Facebook is excluded from last year’s figures, U.S. proceeds are actually up 66 percent from 2012.*
According to the 2013 BDO IPO Halftime Report survey, close to two-thirds (64%) of capital markets executives at leading investment banks anticipate U.S. IPO activity will increase further in the second half of 2013, compared to less than a third (30%) who believe activity will remain flat with the first half of the year and just 6 percent who are predicting a decrease in deals. Overall, capital market executives are predicting a 7.7 percent increase in the number of U.S. IPOs during the second half of the year. They anticipate these offerings will average $265 million in size, which projects to more than $46 billion in total IPO proceeds on U.S. exchanges in 2013.
When asked to identify the key drivers behind increased U.S. IPO activity during the first half of 2013, most investment bankers cite either previously postponed offerings that moved forward as the economy improved (42%) or low interest rates increasing investor demand for higher yielding assets (33%). Other drivers cited were the positive performance of early IPOs encouraging more businesses to make offerings (12%), and private equity (PE) and venture capital (VC) firms needing to reduce debt and deliver returns to clients (12%).
Excluding last year’s Facebook IPO, the average IPO on U.S. exchanges is slightly larger in 2013. Most bankers attribute the increase to larger deals being churned out by PE firms in 2013 (59%). A smaller number of bankers attribute the increased size to stable financials at established industrial companies (26%) and spinoffs from mature businesses (15%).
BDO is the brand name for BDO USA LLP, a U.S. professional services firm providing assurance, tax, financial advisory and consulting services to a wide range of publicly traded and privately held companies.
Lee Graul is a partner in the Capital Markets practice at BDO; Brian Eccleston is a partner in the Capital Markets practice of BDO; Wendy Hambleton is a partner in the Capital Markets practice at BDO; Lee Duran is a partner and private equity practice leader at BDO.