Ernst & Young IPO Insights - EY

Jun 14, 2013 - Improved investor confidence and higher valuations this ... audit and advisory services to private ... Source: Ernst & Young Institutional Investor.
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Ernst & Young IPO Insights IPO outlook from Ernst & Young Strategic Growth Markets June 2013

IPO market open for business > Jacqueline Kelley Americas IPO Leader

Jacqueline Kelley is an Advisory Services partner for Ernst & Young LLP in Orange County, California, and the Americas IPO Leader for the Strategic Growth Markets practice. In this role, she is responsible for leading a practice serving IPO‑bound companies. With more than 20 years of experience, Jackie has an extensive background in providing audit and advisory services to private and public companies, including SOX 404 implementations, annual financial audits, business process reviews and IPO readiness services. Jackie is a CPA in California. She received a Masters in Accounting from the University of Southern California.

> Contact us today For more information on Ernst & Young Strategic Growth Markets, please contact Jennifer L. Compton at +1 201 872 1294 or at [email protected]

Improved investor confidence and higher active by value. Consumer products is the valuations this quarter really opened most active sector this year by value, with 61 the window for effective IPOs as well as deals with a combined value of $42.3 billion. encouraged new registrants into the pipeline. Moreover, retail investments have attracted This quarter’s results through June 14, another $7.9 billion. Collectively, they account 2013 have exceeded Q1 2013 by deal size for nearly 40% of total PE spend year-to-date. and performance. New registrants including Confidence in the markets has given confidential filings made public were up 86% encouragement to companies across a diverse and IPOs that went effective were up by 45%. mix of sectors to take advantage of an IPO. New registrant proceeds were up 189% and A few trends include the re‑emergence of the proceeds from effective IPOs were up 38%. Life Sciences sector which had been quiet Even though Q2 has always been historically for some time. Earlier stage bio‑pharma a strong quarter for companies are IPOs in general, this taking advantage of second quarter has New registrants including confidential the capital markets been more robust as they have been filings made public were up 86% and than expected. able to raise a good IPOs that went effective were up by 45% Despite recent amount of capital. market volatility, Because of the JOBS I am optimistic that Act they are considered emerging growth the energy that has surrounded the markets companies — and many are taking advantage will carry into Q3, and with Q4 also being of the opportunities the legislation allows. historically strong, that should give us the In the U.S, Health care is dominating with momentum to end 2013 on a high note. Financials — a mix of banks, financial services The number of new registrants into the pipeline is up from Q1. These companies are raising more capital and are strong candidates to go public in 2013 due to higher liquidity and valuations. Currently, 14 IPOs are priced to raise more than $6.5 billion in the coming weeks. The strong U.S. IPO market also attracted foreign private issuers, (FPI). Twelve FPIs filed for IPOs in Q2 compared to six in Q1 and two in Q4 2012.

IPOs backed by private equity, (PE), and Venture Capital (VC) firms represent 52% of the deals in Q2. In fact,7 of the top 10 deals in 2013 were PE backed, a function of PE looking to make exits from investments at the beginning of the recession. So far this year, PE firms have spent $35.9 billion in Technology sector deals, making it the second most

and brokerage firms — coming in at a close second. Rounding out the top four sectors is Technology and Real Estate. Technology is a fast growing sector with companies still trying to position themselves for changes the cloud and mobility have brought about. The real estate market continues to be on an upswing in the U.S. and Canada. Recently, we’ve seen an increase in market volatility. However investors are out there looking for competitive pricing, the right management team to instill confidence, and a good company story. The window of opportunity can open and shut at a moment’s notice, but I expect we’ll see continued IPO activity in the second half of the year. For more information, please visit our Global IPO Center of Excellence online.

Ernst & Young IPO Insights

Q2 opens window for IPO opportunities in US Number of effective IPOs

33

Proceeds from new registrations $mm

$15,692 189%

$5,431 Q1 2013 Q2 2013*

* New registrations include confidential filings that were made public as of June 14, 2013.  Q2 data as of June 14, 2013.

Performance review — IPOs reach higher valuations in Q2

10%

1st day average return

No. of IPOs

Proceeds ($mm)

Health care

8

490

Financials

7

2,440

Technology

5

581

Real estate

5

875

Materials

4

883

Consumer products and services

4

1,871

Energy and power

3

699

Industrials

3

1,153

Telecommunications

2

498

Media and entertainment

1

807

Retail

1

204

Total 

43

10,501

1.6%

8% 6%

Q2 effective IPOs by sector As of June 14, 2013

36

12%

Real estate

Q1 2013 Q2 2013**

86%

14%

Technology

38%

$8,572

67

Q1 2013 Q2 2013*

Financial services

$11,864

45%

Number of new registrations

Health care

Effective IPO proceeds $mm

48

Q1 2013 Q2 2013*

Top 2013 IPO sectors

7.5% 10.0%

S&P 500 return Outperform S&P 500

4% 2% 0%

3.7% IPOs in Q1 IPOs in Q2*

IPO outlook from Ernst & Young Strategic Growth Markets | June 2013

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Ernst & Young IPO Insights

Top 2013 VC-backed IPO sectors Technology

Health care

Financial services

Consumer products

What is on investors’ minds?

Ernst & Young

Key critical success factors for an IPO*

Assurance | Tax | Transactions | Advisory 91%

Attractive pricing 65%

Compelling equity story Confidence in management Right timing

35% 29%

Size of the transaction

9%

Reputation of the banking sydicate

7%

Listing venue selection

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57%

Readiness to provide transparency and good corporate governance

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2%

Key concerns for IPO candidates* Overpricing of stock at IPO

85%

Issuer not having the right management

56%

Listing at too young or too early a stage in a company’s life cycle

43%

Listing not conducted at the right time

40%

Incomplete infrastructure preparations pre-IPO

30%

Not enough preparation for investor communications and meetings

29%

Factors that drive investors’ interest and motivationto invest in new listings* Company’s market opportunity to seize growth

90% 83%

Current valuation level Confidence in the economic system Inflow and availability of funds

46% 25%

Confidence in the regulatory system

16%

Recent IPO or follow-on activity

16%

Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the US.

About Ernst & Young’s Strategic Growth Markets Services Ernst & Young’s Strategic Growth Markets (SGM) services guides leading high-growth companies. Our multi-disciplinary teams of elite professionals provide perspective and advice to help our clients accelerate market leadership. SGM delivers assurance, tax, transactions and advisory services to thousands of companies spanning all industries. Ernst & Young is the undisputed leader in taking companies public, advising key government agencies on the issues impacting high-growth companies and convening the experts who shape the business climate. For more information, please visit us at www.ey.com/us/strategicgrowthmarkets, or follow news on Twitter® at EYSGM. Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the US. © 2013 Ernst & Young LLP. All Rights Reserved. SCORE No. BE0230 No. 1303-1055400 West ED None.

* Note: Percentage represents the number of respondents that chose the particular factor as one of their top three choices. Source: Ernst & Young Institutional Investor Survey: Right team, right story, right price 2013

IPO outlook from Ernst & Young Strategic Growth Markets | June 2013

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