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BDO United States

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Jerry Walsh
(631) 419-9008

Tuesday, June 18, 2013

Chicago, IL – According to a new study by BDO USA, LLP, one of the nation's leading accounting and consulting organizations, 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 approximately $41 billion in total IPO proceeds on U.S. exchanges in 2013.

“The U.S. IPO market has had a strong first half to the year. The number of offerings are up significantly and, if you exclude last year's Facebook IPO, total proceeds generated on U.S. exchanges have jumped close to 50 percent from a year ago,” said Lee Graul, a Partner in the Capital Markets Practice at BDO USA. “Based on our survey, the capital markets community is confident that the U.S. IPO market will build on this momentum and generate even more offerings during the remainder of the year.”

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%).

U.S. Will Continue to Lead IPO Proceeds

In a continuation of a trend that began two years ago, U.S. exchanges are playing a larger role in the global IPO marketplace in terms of total proceeds. Exactly half (50%) of all investment bankers anticipate U.S. exchanges maintaining their current share of global proceeds during the remainder of the year, while 45 percent believe the U.S. will continue to increase its share of the pie. Just five percent predict the U.S. share will decline in the second half of 2013.

When asked to identify the main reason for the U.S. leadership position in global IPO proceeds, a majority (57%) of the bankers emphasized the improving U.S. macro-economy as the key driver. Larger deals from U.S. PE firms (27%) and the lack of offerings in Hong Kong and China (16%) were the other reasons cited.

Industry Forecast

“One of the most significant developments of the U.S. IPO market in the first half of 2013 is the breadth of industries represented among this year's offerings,” said Brian Eccleston, a Partner in the Capital Markets Practice of BDO USA. “For six of the past seven years the technology industry has led all sectors in bringing offerings to market. During that time, many would argue that the health of the IPO market was tightly linked to the offerings coming from the technology sector. But this year, IPO activity in the U.S. has spanned many industry sectors. The breadth of industries represented among this year's offerings may be a very positive sign that both businesses and investors have become much more optimistic about the broad U.S. economy."

Thus far in 2013, the financial sector has led all industries in U.S. IPOs, followed by healthcare and technology. Moving forward, three-quarters (75%) of investment bankers predict more tech offerings during the second half of the year and a similar proportion (72%) forecast an increase in IPOs from the energy sector. Healthcare (68%), real estate (59%) and biotech (53%) are the other verticals where increases in deals are expected during the remainder of the year (see full chart below).

Industry Increase Flat Decrease
Technology 75% 22% 3%
Energy/Natural Resources 72% 18% 10%
Healthcare 68% 28% 4%
Real Estate 59% 28% 13%
Biotech 53% 40% 7%
Financial 39% 51% 10%
Industrial/Manufacturing 35% 48% 17%
Media/Telecom 30% 55% 15%
Consumer/Retail 28% 52% 20%

(Proportions of Capital Markets Executives expecting IPO activity to increase, remain stable or decrease in specific industries during remainder of 2013.)

These are just a few of the findings of The 2013 BDO IPO Halftime Report survey which examines the opinions of 100 capital markets executives at leading investment banks regarding the market for initial public offerings in the United States during the second half of the year. The survey was conducted in June of 2013.

Other major findings of The 2013 BDO IPO Halftime Report:

  • Threats. Global political and financial instability (64%) is, by far, the most often cited threat to the U.S. IPO market in the second half of the year. Constrained bank lending (18%), the Sequester and related government spending cuts (9%), and continued high unemployment (9%) were the other threats mentioned.
  • The Source of IPOs? When asked what will be the greatest source of IPOs in the second half of the year, most capital market executives cite either private equity (42%) or venture capital (27%) portfolios. Spinoffs and divestitures (16%) and owner-managed, privately-held businesses (15%) are the other sources identified by the bankers.
  • Bigger Deals. 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%). Smaller numbers of bankers attribute the increased size to stable financials at established industrial companies (26%) and spinoffs from mature businesses (15%).

The BDO IPO Halftime Report is a national telephone survey conducted by Market Measurement, Inc., an independent market research consulting firm, on behalf of BDO USA. Executive interviewers spoke directly to capital markets executives, using a telephone survey conducted within a scientifically-developed, pure random sample of the nation's leading investment banks.

BDO USA is a valued business advisor to businesses making a public securities offering. The firm works with a wide variety of clients, ranging from entrepreneurial businesses to multinational Fortune 500 corporations, on a myriad of accounting, tax and other financial issues.


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