Private equity made a strong showing in the IPO market during the past two years, according to a new study.
Law firm Proskauer Rose LLP analyzed 119 IPOs from 2014 to compile its second annual “IPO Study.” Of that total, 56 (or 47 percent) were sponsored-backed, the study said. That compares to 136 IPOs in 2013, of which 57 (or 42 percent) were owned by private equity.
“This is the first time in a while that we’ve seen two strong years in a row,” said Frank Lopez, a Proskauer partner and co-head of the global capital markets group.
Looking at last year’s sponsor-backed IPOs by sector, Proskauer found that 15 were in healthcare; 12 in consumer and retail; 10 in technology, media and telecommunications; eight in industrials; six in financial services; and five in energy and power.
In all, 275 U.S. IPOs raised $85.3 billion in proceeds in 2014, according to the Proskauer study, which tracked only IPOs with $50 million or more in gross proceeds. Sixteen IPOs raised at least $1 billion, which was the most in any year since 2001.
From 2001 to 2012, buyout shops most often sold their investments when they wanted to exit, Lopez said. That changed when IPO deal volume returned in 2013, with more firms using new issues to monetize their deals, he said.
Still, IPOs have slowed down this year. Lopez attributed the drop partly to falling oil prices. Energy, he said, was a meaningful part of the IPO sector last year. “There won’t be IPOs in that sector in the near future,” he said.
One of the more surprising results in 2014 was the popularity of the Jumpstart Our Business Startups (JOBS) Act. The JOBS Act became effective in April 2012 and created a new class of issuers, Emerging Growth Companies (EGCs). The law gave EGCs, which typically have less than $1 billion of gross revenue, flexibility when pursuing IPOs.
Proskauer found that 77 percent of last year’s IPOs came from EGCs. Generally, the JOBS Act lets EGCs go through 90 percent of the SEC process confidentially before they have to file publicly. “Issuers can be thoughtful and opportunistic about publicly filing and launching an IPO,” Lopez said.
When the JOBS Act came out in 2012, many in the capital markets sector were skeptical whether the industry would be receptive to the law’s flexibilities, Lopez said.
“That’s not been the case,” he said. “Companies are taking advantage of it… Now we’re even seeing a huge incidence of foreign companies coming to the U.S. that we haven’t seen for many years.”