PwC US IPO Watch: US IPO Market Presents Challenges During Q3 2010 Financial Sponsors & Non-US Issuers Lead Growth of a Robust Pipeline

NEW YORK, Oct. 6 /PRNewswire/ -- Amidst improving equity markets, the US IPO market continued to pose challenges to deal value.  While third quarter deal volume increased substantially over the prior year, deal value decreased by approximately 16 percent.  Leadership from financial sponsors and non-US issuers continued to reinvigorate the IPO pipeline, according to PwC's US IPO Watch, a quarterly and annual analysis of IPOs on US stock exchanges.

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For the three month period ending September 30, there were 32 IPOs completed raising $4.8 billion, versus 20 IPOs with a combined value of $5.8 billion for the same period last year.  According to PwC, a decrease in third quarter IPO value was skewed by the handful of large deals completed last year.  In the third quarter of 2009, there were three IPOs with proceeds over $500 million each, and one billion-dollar offering from Shanda Games Ltd.  There was only one IPO above $500 million and no billion dollar deals in the third quarter of 2010.

Q3 Comparison: value and volume of IPOs

Year to date, capital raised in the US IPO market totaled $14.1 billion from 99 IPOs, compared with 34 offerings which raised $8.1 billion during the first three quarters of 2009. The year-over-year comparison of the first nine months represents a 74 percent increase in value and a 191 percent increase in volume.

According to PwC, 67 new companies entered the IPO registration process during the July-September timeframe, further adding to the growing pipeline.  A number of these potential offerings will become the largest deals of 2010, if successful.

"The trend of the year-to-date statistics for both volume and value are a clear indication of a strengthening IPO market.  The rapid increase in deal volume, both successful IPOs and pipeline growth, coupled with  a decline in average deal size, suggests we may still be building a base," said Scott Gehsmann, capital markets partner with PwC Transaction Services.

Value and volume of IPOs by quarter

Financial sponsors maintained their leadership, adding 28 new offerings which raised $4.8 billion -- a whopping 99 percent of total proceeds in the third quarter.  During the first nine months of 2010, financial sponsors raised $11.9 billion from 79 offerings -- equivalent to 84 percent of total deal value and 80 percent of total offering volume.

"The growing activity from financial sponsors over the last several quarters demonstrates their understanding of and focus on IPO readiness," shared Gehsmann.  "Their diligent approach to preparing for life as a public company enables the rapid pursuit of a market window."

According to PwC, non-US issuers continued to have a strong presence in the US IPO market, with China surpassing other countries as the clear winner in the quarter.  In the last three months, there were 12 non-US company IPOs, with China contributing seven new offerings raising $0.7 billion, while Canada, the Netherlands, Germany, India and Israel contributed one offering each.  For the first nine months of 2010, non-US issuers raised $4.1 billion from 30 offerings, representing 29 percent of total proceeds and 30 percent of total offerings.  China has accounted for 19 IPOs, or 19 percent of the volume, totaling $1.3 billion in proceeds thus far this year.

"We're seeing smaller, rapidly-growing companies from around the world take advantage of the IPO market for raising capital to fuel growth -- and we expect that trend to continue," continued Gehsmann.  "Non-US companies, particularly small and mid-cap, emerging markets-based companies appear to be hitting the US IPO market sweet spot, as average deal size has declined."

While overall proceeds raised in the third quarter decreased, the total number of offerings was up 60 percent from 2009, reflecting a smaller average deal size.  According to PwC, the average IPO in the third quarter of 2010 raised $151 million, versus an average of $289 million in the same period last year.  A similar trend is evident in the year to date comparison.

According to PwC, a broad diversification of industry sectors continues to contribute to deal volume and the pipeline in the US IPO market.  In the third quarter, the technology sector had the strongest showing of new issuers with eight IPOs raising $1.8 billion, 38 percent of the total proceeds raised. The Services and Healthcare sectors each contributed five IPOs, followed by Consumer and Industrial with four, and the Energy and Financial sectors each contributed three offerings.

According to PwC, there were 10 US IPOs withdrawn this quarter, and a number of "ready" IPOs that were deferred, indicating that companies were not rushing into improving but choppy equity markets.

Concluded PwC's Gehsmann, "Timing the launch of an IPO remains a significant challenge.  At the same time, the readiness 'bar' continues to rise with post-deal performance expectations.  The increasing focus on an issuer's ability to anticipate and manage the impact of environmental changes, risks and uncertainties as a public company reinforces our message -- being well-prepared to run the race is just as important as getting to  the starting line."

In terms of listing destination, the NYSE led in volume and value with 17 IPOs raising $2.9 billion, while the NASDAQ had 15 offerings raising $1.9 billion during the third quarter.

PwC's US IPO Watch is a quarterly & annual survey of IPOs listed on US stock exchanges.  These include IPOs by domestic and foreign companies, best-efforts, business development companies, filings with the FDIC, and bank demutualizations.  IPOs do not include unit investment trusts and fully classified closed-end funds.  Visit our website, www.pwc.com/us/ipo, for the 2009 US IPO Watch, other IPO-related reports, and information about PwC's IPO Services.

PwC's Transaction Services practice provides due diligence for M&A transactions, along with advice on M&A strategy and integration, restructuring, divestitures and separation, valuations. With approximately 1,000 deal professionals in 16 cities in the United States, and a global network of over 6,000 deal professionals in 90 countries, experienced teams are deployed with deep industry and local market knowledge and technical experience tailored to each client's situation. The Transaction Services team can be involved from strategy to integration and employ an integrated business approach to uncover the realities of a deal. The field-proven, globally consistent, controlled deal process helps clients minimize their risks, progress with the right deals, and capture value both at the deal table and after the deal closes. For more information about M&A and related PwC services, please visit: www.pwc.com/ustransactionservices.  

About PwC

PwC (www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 163,000 people in 151 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice.

© 2010 PwC.  All rights reserved. In this document, "PwC" refers to PricewaterhouseCoopers LLP, a Delaware limited liability partnership, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

SOURCE PwC

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