U.S. Record IPO Activity from 2006 Continues in 2007, According to a New Report from Ernst & Young
Pipeline Showing Great Strength
NEW YORK, JUNE 20, 2007 –– Thriving U.S. companies conducted the world’s highest number of IPOs in 2006 with a streak that looks set to continue in 2007. Global data shows U.S.-based companies generated the largest number of IPOs (187) in 2006, raising $34.1 billion, according to Ernst & Young’s Global IPO Trends Report
1, released today.
In Q1 of 2007 alone, 39 U.S.-based companies raised $6.9 billion through IPOs, leading the globe in amount raised. This maintains last year’s momentum for companies domiciled in the U.S. While companies in the U.S. and China were second to companies in Japan for the number of IPOs in Q1 2007, U.S. companies outpaced both Japanese ($932 million) and Chinese ($5.7 billion) companies in amount raised.
“The fourth quarter of 2006 was the busiest for IPO activity by U.S. companies since 1999, raising $12.4 billion in 72 IPOs,” said Maria Pinelli, Americas Strategic Growth Markets Leader at Ernst & Young LLP. “In 2007, U.S.-based company activity continues to feed into the U.S. stock markets, which also attract key international IPOs, particularly in knowledge-driven sectors like technology and healthcare. Deal sizes are larger than ever and private equity is backing many of them.”
2006 Growth Sets the Pace
In 2006, the median deal size for U.S. companies was $98 million – up nine percent from 2005. The average deal size equaled $182 million – up 12%. The largest deal globally in 2006 was the Industrial and Commercial Bank of China, a former state-owned enterprise which raised $22 billion in a Hong Kong listing. The largest U.S. IPO in 2006, MasterCard, raised $2.6 billion.
“We’ve seen listings in regional markets continue to grow. If you look at where companies conduct their initial public offerings, over 90% of companies list on domestic exchanges,” said Pinelli. “This historical trend held true for the largest deals of 2006 and the strengthening in global capital markets makes it even easier for them to do so.”
However, the U.S. continues to attract leading foreign companies, including many in the technology and healthcare industries. Examples include:
- Qimonda, a semiconductor company from Germany ($628 million on the NYSE)
- Mindray Medical International, a Chinese healthcare company ($311 million on the NYSE)
- Melco PBL Entertainment, a Hong Kong online gaming company ($1.3 billion on Nasdaq)
- Himax, a Taiwanese semiconductor company ($511 million on Nasdaq)
- CTC Media, a Russian media company ($346 million on Nasdaq)
- Verigy, a Singapore electronics company ($128 million on Nasdaq)
- China GrenTech Corp, a Chinese wireless company ($113 million on Nasdaq)
This illustrates a larger trend in 2006 during which the healthcare (36 IPOs), technology (29), and energy and power (27) industries generated the most deal activity in the U.S. Consumer products and services ($6.9 billion raised), energy and power ($6.5 billion), and industrials ($4.5 billion) were the top sectors in total capital raised on U.S. exchanges.
Q1 ’07 Robust Globally, Strong in U.S.
In the first quarter of 2007, there were 372 IPOs globally, raising a total $35 billion. This is well ahead of the 345 IPOs – raising $34 billion – that were present in the Q1 2006 pipeline.
The largest deal this year is China’s Industrial Bank Co, which raised $2.0 billion. The U.S. had two of the top 10 IPOs globally – National CineMedia’s $882 million IPO (the 5th largest globally in Q1 2007) and Fortress’ $634 million IPO (the 9th largest globally).
Private Equity Impacts Growth
U.S. private equity firms are key players in the public markets, especially the super-sized deals. In 2006, private equity was behind 43% of all IPO deals of U.S. companies and 55% of all IPO funds raised by U.S. companies. Furthermore, private equity was behind six of the ten biggest deals in the U.S. in terms of funds raised, with Spirit AeroSystems, an industrial company, as the largest U.S. private equity-backed IPO deal.
The private equity effect continued in Q1 2007, backing 26% of all U.S. IPO deals and 36% of funds raised. As private equity funds wish to exit out of their investments, either through a sale or a new issuance, they will undoubtedly continue to feed the IPO pipeline.
Venture capital funding is also having a significant effect on the IPO market. In 2006 and the first quarter of 2007, one-third of all U.S.-domiciled IPOs were venture backed.
Healthy Pipeline Points To Continued Strength
“As of May 30, the pipeline of U.S. IPO candidates was extremely strong – 131 companies filed to raise $24.8 billion," Ms. Pinelli said. "Healthcare is the most active pipeline sector with 31 IPOs in registration. Technology has 29 IPOs in registration. Given this pipeline, the outlook for 2007 is very promising."
About Ernst & Young’s Strategic Growth Markets Practice
Ernst & Young’s Strategic Growth Markets practice (SGM) is proud of its role in serving companies as they become market leaders. SGM is all about helping growing companies maintain their momentum. We understand growing companies and the delicate balance between sustaining growth and innovation, while managing risk and building infrastructure. We are the leader in serving the Russell 3000, high-growth-private companies, companies with significant investments from venture capital or private equity firms, and companies planning to go public. By accessing our global resources we can help you with mergers, acquisitions and other strategic transactions; aligning your tax strategy with your business goals; managing risk and improving processes; and reducing the complexity of regulation and reporting.
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1 U.S. totals based on global IPO activity by U.S.-domiciled companies. Data provided by Ernst & Young, Dealogic, and Thomson Financial. IPOs exclude non-operating companies.
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