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Strong U.S. IPO Market

Stars Align and 2013 Proves to be Hottest U.S. IPO Market Since 2004 — Momentum Continues in 2014

— PE-backed IPOs dominate with most active year since 2007

— 2013: year of the healthcare IPO

— “Blurring” of technology and other industries lead to interesting implications for IPOs

NEW YORK, Dec. 10, 2013, The market environment delivered all of the right signals in 2013, presenting a long-awaited window of opportunity for IPOs.  With a calmer economic climate, companies looking to go public were seemingly unphased by the 4th quarter government shutdown. This, combined with low volatility and a huge backlog of PE-backed IPOs seeking an exit, brought IPOs back with a bang: 222 IPOs in total will go effective in 2013 raising proceeds of $59.7 billion[1], with 76 deals in the public pipeline at the end of Q4. Activity and momentum in 2014 are only expected to continue.

“Investors have had the opportunity to engage with a variety of companies in the pipeline and their appetite for risk has returned,” said Jackie Kelley, for the global EY organization. “Unlike five years ago when, for the most part, tech companies were the only ones getting out, we now see pockets of activity in multiple sectors. This was a standout year for healthcare, for example. VC-backed companies came back to market and PE-backed IPOs will continue to push into 2014.”

Year over year, the number of IPOs increased 67%, from 133 in 2012 to 222 in 2013.  Proceeds increased 28%. Quarter over quarter, there were 67 IPOs in Q4 2013 compared with 33 in Q4 2012, an increase of 103%, with proceeds up 171%; additionally, the number of IPOs in Q4 increased by 12%, and proceeds increased by 96% when compared with Q3 2013.

IPOs from around the world
The US continues to attract IPOs from around the world as companies seek to capitalize on the momentum of the US capital markets. For example, 36 out of 222 US IPOs were cross-border IPOs, ie 16% of US exchanges IPOs by deal number and 11% by capital raised (US$6.7b raised) were from foreign private issuers. This compares to 9% of US IPOs by deal number and 12% by capital raised in 2012.

The IPO market surge in the US, positive investor sentiment for this asset class and appetite for global investment makes the US attractive and much more competitive than their domestic markets.

PE-backed IPOs Dominate:
PE activity provided a key source of IPO-related exits this year. As an indicator of the volume, in 2007, the peak year for PE-backed IPOs, there were 94 deals with proceeds of $20.3 billion. In 2013, by contrast, of the 222 IPOs, 94 were PE-backed and valued at $32.8 billion. An impressive 42% of all US IPOs were from PE backed companies.

Large offerings in the oil and gas sector drove the trend, collectively raising $5.8 billion. And despite relatively robust levels of exit activity over the last two years, there remains a significant backlog of PE exits that will continue to spur IPO activity into 2014. Multiple PE firms raised upwards of $10 billion in 2013, a sign of optimism for future deal making. While the increased interest in IPOs is a positive development for PE exits, an uptick in M&A will ultimately be required to fully liquidate the current PE portfolio.

Healthcare on Top:
After being sidelined for almost 10 years, the healthcare sector came back to market in a big way in 2013. Most of the healthcare companies in the pipeline were smaller IPOs that really benefitted from the JOBS Act, legislation put in place over a year ago easing the IPO path for companies with post-IPO market cap size of less than $1 billion.

However, investors, chasing healthcare IPOs for their great performance and the substantive products they are developing, may not stick around if market volatility heats up again. Other sectors rounding out the top five include: Technology, Energy and Power, Real Estate and Financial Services.

Emerging IPO Companies Will Blur Distinctions Between Sectors:
The growing convergence between technology companies and other industries is creating new opportunities for companies to add shareholder value via the capital markets. “We expect to see more blurring of tech and other industries — including consumer products, media, real estate, financial services,” said Kelley. “Companies in these “blurred” industries, meaning they can cross over into two different sectors, are coming to market. They will have a choice under which sector to list and it’s likely that valuation will be a key driver.”

As more consumers utilize mobile and cloud technology to get what they want and faster, emerging IPO companies coming to market will be more focused on creating direct touch points with consumers, eliminating  the middle man to bring suppliers and customers closer together, according to Kelley. She suggests we can expect to see more companies offering personalized products or a more personal user experience, such as making personal and business transactions faster, simpler and more secure; building customer trust; and delivering quality content and insight for users.

2014 Looking Ahead:
As 2014 rides the performance wave of 2013, the future looks bright for the IPO pipeline. Investors will look to the IPO market to drive portfolio growth. Inbound interest has piqued, with companies in Europe, the Middle East and South America looking to list on the U.S. markets –driven by the high valuations companies have garnered and good post-IPO performances over the past year.

“IPOs in 2014 will be a combination of household names, as well as disruptive, innovative companies. The backlog of PE-backed IPOs will continue to push into 2014 and companies blurred by sector convergence will drive market activity, all making for another exciting year,” concluded Kelley.

Notes to editors
All Data sourced from Dealogic.

About EY’s IPO offerings

EY firms are leaders in helping to take companies public worldwide. With decades of experience our global network is dedicated to serving market leaders and helping businesses evaluate the pros and cons of an IPO. We demystify the process by offering IPO readiness assessments, IPO preparation, project management and execution services, all of which help prepare you for life in the public spotlight. Our EY Global IPO Center of Excellence is a virtual hub which provides access to our IPO knowledge, tools, thought leadership and contacts from around the world in one easy-to-use source.

About EY
EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

[1] Data are completed IPOs through December 5, 2013 and projected IPOs in December, 2013

 

SOURCE:

EY

http://www.ey.com

 

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Investment Banking

Merger and Aquisitions Professionals Expect To Perform More Deals In 2013

M&A Professionals Expect To Perform More Deals In 2013, According To KPMG Survey

Favorable Dynamics to Drive Technology, Financial Services and Healthcare Middle-market Deal Activity in 2013

NEW YORK, March 6, 2013, According to a survey conducted by KPMG LLP, the U.S. audit, tax and advisory firm, merger and acquisitions (M&A), private equity and tax professionals from the technology, financial services and healthcare sectors, among others, expect an increase in their companies’ or clients’ deal activity in 2013 compared to 2012. Of the more than 400 survey respondents, 60 percent said that they would do more deals this year than last year.

The simpler financing terms associated with smaller deals, as compared to both large transactions and the megadeals, will drive middle-market M&A activity in the balance of 2013, according to 24 percent of the poll population. However, 49 percent of respondents felt that collectively, simpler financing terms, fewer risks and integration challenges, as well as the less complexity of due diligence that’s needed for deals valued under $250 million, will serve as the catalyst for a deal market dominated by middle-market activity in 2013.

In fact, 22 percent of survey respondents indicated that in 2013 thus far, the deal market is already experiencing a high volume of middle-market activity; they also acknowledged favorable credit terms (11 percent) and elevated levels of cash on corporate balance sheets (eight percent) as driving the recent deals in the marketplace. Corporate buyers have the advantage in the M&A space over private equity buyers (six percent) halfway through the first quarter of 2013.

“The underlying fundamentals in the deal market are improving, with the combination of a stabilizing U.S. economy, favorable credit terms, open debt markets, and high cash balances paving the way for an increase in M&A volume this year,” said Dan Tiemann , Americas lead for KPMG’s Transactions & Restructuring practice. “As a result, companies may be highly motivated to execute transactions that drive their growth agendas, including deals that allow for business transformation and optimize new operating models.”

When asked what effects new regulations might have on their ability to do deals in 2013, 21 percent of the poll population stated that they will cause integration challenges during the M&A process and in post-deal phases for their companies and clients. Eighteen percent cited that new regulations have temporarily delayed their ability to do deals, followed by seven percent who have delayed M&A activity indefinitely; however, another seven percent cited they will actively pursue deals because of new regulation.

Executives plan to selectively invest in emerging markets outside of the U.S., with China / Asia Pacific cited as the leading target region (20 percent), followed by Brazil / Latin America (17 percent), Western Europe (10 percent), India (four percent), Russia (two percent) and Eastern Europe (two percent). Forty percent of the poll respondents indicated they do not plan on investing in any of these emerging markets in 2013, congruent with KPMG’s M&A Outlook Survey 2013 conducted in November 2012 where respondents stated the vast majority of deal activity would take place in North America.

The breakdown of respondents includes M&A professionals in the following sectors: technology (17 percent); financial services (17 percent); healthcare (14 percent); diversified industrials (nine percent); energy (eight percent); and consumer markets (seven percent).

About KPMG LLP

KPMG LLP, the audit, tax and advisory firm (www.kpmg.com/us), is the U.S. member firm of KPMG International Cooperative (“KPMG International”). KPMG International’s member firms have 152,000 professionals, including more than 8,600 partners, in 156 countries.

Contact:
Jamie Bredehoft
KPMG LLP
(201) 505-6074
jbredehoft@kpmg.com

SOURCE:

KPMG LLP

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Banking Corporate Finance Investing Investment Banking

KPMG Survey: Mergers And Acquisitions Projected To Be On The Rise In 2013

KPMG Survey: Mergers And Acquisitions Projected To Be On The Rise In 2013

Survey Results Show Expected Focus on Middle-market Deals in 2013

NEW YORK, Jan. 22, 2013, Merger and acquisition (M&A) activity is expected to increase in 2013, according to a survey conducted by KPMG LLP, the U.S. audit, tax and advisory firm, and the Research practice unit of SourceMedia, the publisher of Mergers & Acquisitions. The survey of more than 300 M&A professionals in the U.S. found that 76 percent of respondents anticipate that their company will make at least one acquisition in 2013.

According to 60 percent of the M&A professionals, companies’ large cash reserves will drive deal activity and 40 percent acknowledged favorable credit terms as a supporting factor. Opportunities in emerging markets will also be a catalyst for deals, said 26 percent of respondents. Primary reasons for making acquisitions varied among the survey population, with 20 percent of respondents reporting that expanding geographic reach would be their primary motivator, while 19 percent cited a quest for profitable operations, followed by 17 percent who anticipated making acquisitions in order to enter a new line of business.

“Although there is still plenty of uncertainty in the markets, we will likely see M&A activity pick up as the year progresses,” said Dan Tiemann , Americas lead for KPMG’s Transactions & Restructuring practice. “Financing conditions continue to be positive. Many companies are holding large amounts of cash and the U.S. debt markets remain open.” Tiemann also added, “As part of efforts to pursue their growth agendas, companies will look to execute transactions that align with their business priorities and strategic road map.”

Deal size is expected to remain on the smaller side, similar to 2012. Seventy-nine percent of the survey population expects their deals to be valued at $250 million or less, and 12 percent foresee deals valued between $250 million and $500 million. Only two percent expect to engage in deals valued between $1 billion and $5 billion.

The survey results are consistent with marketplace trends, said Phil Isom , U.S. leader for KPMG’s Corporate Finance and Restructuring practice. “Middle-market deals continue to dominate. They are easier to finance and to justify to shareholders in what is still a somewhat uncertain economy,” he said.

The survey also examined respondents’ projections for M&A among specific industries, which indicate possible increased activity in the technology sector (39 percent), healthcare and pharmaceuticals sector (35 percent), and energy sector (31 percent). When asked which region would experience the most deals in 2013, 73 percent of respondents cited North America. Western Europe and China garnered 28 percent and 27 percent of responses, respectively.

Marc Moyers , KPMG’s national sector leader for Private Equity, agrees that technology and healthcare will continue to be attractive, especially for private equity investors. “The constantly evolving world of technology and investment opportunities that arise as we get more clarity around Obamacare will create attractive opportunities in those sectors,” he said. “Private equity investors will continue to seek out U.S. companies with significant upside potential, as well as emerging markets with strong growth opportunities.”

Additionally, nearly two-thirds of the M&A professionals noted that deal activity would likely be most inhibited by recessionary fears and a slow growth environment. Thirty-one percent would credit sluggish deal activity to uncertainty surrounding the tax code, whereas concerns about Europe were cited by 23 percent and regulatory considerations by 20 percent.

Sixty-nine percent of survey respondents said they considered tax implications at the outset on a deal. “Every transaction — merger, acquisition, or restructuring — has tax implications,” according to Lisa Madden , U.S. leader for KPMG’s M&A Tax practice. “How the business is transferred, what jurisdictions the business operates in, and where the acquisition financing is placed within the enterprise can all have a major impact on the way a deal is structured and, perhaps most important, on its final value for stakeholders.”

Integration challenges should also be analyzed at the inception of a deal. Survey results concluded that the most significant integration concerns are cultural issues (38 percent), human capital issues (36 percent), and operational and rationalization issues (34 percent).

With the prospect of significant synergy opportunities and the impetus to pay a higher price for assets to support long-term economic and strategic goals, corporate buyers will have an advantage over private equity buyers in the current deal environment, said 44 percent of the survey population. Thirty percent of respondents thought private equity buyers would have the advantage, while 17 percent responded that neither party would have the advantage.

About the Survey

KPMG LLP engaged the Research practice unit of SourceMedia, the publisher of Mergers & Acquisitions, to survey 305 merger and acquisition professionals from U.S. corporations, private equity firms and investment funds in November 2012. A complete copy of the report is available on the KPMG U.S. website.

KPMG LLP

KPMG LLP, the audit, tax and advisory firm (www.kpmg.com/us), is the U.S. member firm of KPMG International Cooperative (“KPMG International.”) KPMG International’s member firms have 145,000 people, including more than 8,000 partners, in 152 countries.

Contact:

Jamie Bredehoft

KPMG LLP

(201) 505-6074

jbredehoft@kpmg.com

SOURCE: KPMG LLP