By Thomas Hiller
Aug. 4, 2011
The market is looking good for companies planning to file an IPO during the second half of this year, especially for those in the technology industry. According to our recent survey of 100 investment bankers, a majority (59 percent) believe U.S. IPO activity will increase in the second half of the year, with almost a fifth (18 percent) describing the increase as substantial. In addition to continued growth in the number of deals, these capital markets executives at leading investment banks are forecasting a continued increase in the size of the offerings. Only 13 percent of the survey participants expect a decline in IPOs in the second half of 2011, while more than a quarter (28 percent) forecast activity will be unchanged from the first half of the year.
While the overall U.S. IPO market has shown vigorous activity so far this year, the state of Michigan has yet to see an IPO in 2011. Last year, two Michigan companies went public: General Motors and Tower International—with the GM offering raising a year-best $15.8 billion. The local Michigan business community is unsure about how the favorable IPO market will impact their operations, yet this shared optimism from the capital market community serves as a welcome and positive sign for the health of the overall economy, Michigan included.
The BDO IPO Halftime Report predicts a 9.5 percent increase in the number of U.S. IPOs in the latter half of 2011. The bankers anticipate these offerings will average $368 million, which projects to more than $57 billion in total IPO proceeds on U.S. exchanges in 2011 (a potential increase of almost 50 percent from 2010). Given the increase in U.S. exchanges in the latter half of the calendar in seven of the last eight years, it is no real surprise that investment bankers are predicting overall continued growth. The financial crisis in 2008 was the one exception since the IPO market took a harsh hit (with only 31 IPOs in 2008 and 63 in 2009); Michigan, like most other states, saw no local companies go public over the course of 2008 or 2009.
Growth Drivers
In 2011, IPO activity on U.S. exchanges has increased significantly year-over-year. When asked to identify the key driver of this growth, investment bankers cited the general market stability encouraging previously postponed offerings to move forward (47 percent), low interest rates increasing investor demand for higher yielding assets (29 percent) and private equity (PE) and venture capital (VC) firms needing to reduce debt and deliver returns to clients (21 percent).