Chicago, IL – According to a new study by BDO USA, LLP, one of the nation’s leading accounting and consulting organizations, capital markets executives at leading investment banks are projecting continued growth in initial public offerings (IPOs) on U.S. exchanges in 2014. Sixty-three percent predict an increase in U.S. IPOs in the coming year, while just over a quarter (27%) forecast activity as flat compared with 2013. Only 9 percent expect a decrease in offerings on domestic exchanges. Overall, bankers predict a 9 percent increase in the number of U.S. IPOs in 2014. They anticipate these offerings will average $273 million, which projects to $66 billion in total IPO proceeds on U.S. exchanges.
“In 2013, the U.S. IPO market experienced a renaissance with both total offerings and proceeds raised reaching the highest levels since 2000. Perhaps most impressive is that this performance was accomplished without the benefit of a Visa, GM, Facebook or other major offering to pump up proceed levels,” said Wendy Hambleton, a Partner in the Capital Markets Practice of BDO USA. “Investor optimism has finally rebounded from the financial crisis and the investment banking community is predicting even more deals and higher proceeds in 2014.”
IPO activity on U.S. exchanges was up dramatically in 2013 and capital markets executives identified multiple catalysts for the increase in offerings. When asked to identify the most prominent factor behind the increase in IPOs, the bankers are fairly evenly divided among three factors - continued low interest rates increasing investor demand for higher yielding assets (27%), increased confidence in the U.S. economy (26%) and positive IPO performance encouraging more businesses to make offerings (24%). Smaller proportions cite increased investor cash flow into stock focused mutual funds (12%) and the JOBS Act encouraging emerging businesses to pursue offerings (8%).
When asked to comment upon the greatest threat to a healthy U.S. IPO market in 2014, 43 percent of the I-bankers cite the Federal Reserve paring back monetary stimulus, while close to one quarter (24%) identify global political and financial instability. Threat of tax increases (13%), failure to raise the U.S. debt ceiling and related government spending cuts (11%), as well as high unemployment (8%) are identified as threats by smaller minorities of the participants.
The strength of last year's IPO market was the wide breadth of industries represented among the offerings. In terms of how individual industries will fair in 2014, almost three quarters (73%) of those in the investment banking community are predicting an increase in offerings from the technology industry. Lesser majorities forecast increases in offerings in the energy (59%), biotech (58%) and healthcare (54%) verticals. Given the breadth of industries that contributed to the robust growth in the 2013 U.S. IPO market, no other industry is predicted to achieve an increase in IPOs by a majority of the survey participants. (see full chart below).
(Proportions of Capital Markets Executives expecting IPO activity to increase, remain stable or decrease in specific industries.)
These are just a few of the findings of The 2014 BDO IPO Outlook 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 in the coming year. The telephone survey was conducted in December 2013.
Other major findings of The 2014 BDO IPO Outlook Survey:
ROI. In 2014, the investment banking community is predicting one-day returns of 15 percent and overall returns of 21 percent for the average IPO. Certainly a healthy forecast for any year, but not quite up to the levels of 2013.
PE Remains Lead Source of IPOs. For the fifth consecutive year, private equity portfolios (43%) are the most often predicted source of IPOs in the coming year. Owner managed privately-held businesses (23%), venture capital portfolios (22%), and spinoffs and divestitures (12%) are the other sources identified by the bankers.
Valued Offering Attributes. When asked what offering attributes will be most valued by the investment community in 2014, 44 percent cite innovative businesses with rapid growth potential. Long-term growth potential (22%), stable cash flow (12%), profitability (11%), strength of industry vertical (8%) are cited by smaller proportions of participants.
The BDO IPO Outlook Survey is a national telephone survey conducted by Market Measurement, Inc. 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 multinational Fortune 500 corporations to more entrepreneurial businesses, on a myriad of accounting, tax and other financial issues.
About BDO USA
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