Capital markets executives at leading investment banks predict continued growth in the number and size of initial public offerings on U.S. exchanges during the remainder of 2011, according to a new study by BDO USA LLP.

A 59 percent majority 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. 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. 

Overall, bankers predict a 9.5 percent increase in the number of U.S. IPOs in the latter half of 2011. They anticipate these offerings will average $368 million, which projects to more than $57 billion in total IPO proceeds on U.S. exchanges in 2011 (an increase of almost 50 percent).

"Given recent history, it isn't surprising that investment bankers are forecasting continued growth in U.S. IPO activity for the second half of the year,” said Wendy Hambleton, a partner in the Capital Markets Practice of BDO USA. “Offerings on U.S. exchanges have increased in the latter half of the calendar in seven of the last eight years. The lone exception was 2008 when the financial crisis essentially shut down IPO activity altogether. However, with the performance of recent offerings all over the map and a good deal of uncertainty remaining about the health of the economic recovery, this confidence from the capital markets community is a welcome and positive sign for the health of the economy."

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 cite 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 (and venture capital firms needing to reduce debt and deliver returns to clients (21 percent).

The size of the average IPO in 2011 is running considerably larger than 2010 and capital markets executives identified several contributing factors for this trend. The most frequently cited factor in driving these larger deals are more offerings from PE backed business (43 percent).  The other main reasons cited for the larger deal size are that the IPOs are from more mature companies (33 percent) and the offering companies have more stable financials (24 percent).

As predicted in the 2011 BDO IPO Outlook at the start of this year, U.S. exchanges have reversed the trend of their declining role in the global IPO marketplace.  When asked to identify the main reason for the sharp increase in the U.S. share of global IPO proceeds, the bankers cited three contributing factors: foreign businesses listing on U.S. exchanges (36 percent), pricings of large private equity backed offerings on U.S. exchanges (36 percent) and a decrease in international IPO activity (27 percent). More than a third (37 percent) of the investment banking community see U.S. exchanges continuing to increase their percentage of global IPO proceeds during the remainder of the year, but almost half (47 percent) believe it will remain steady.  Just 15 percent see the U.S. share declining in the second half of 2011.

Thus far in 2011, the technology sector has led all industries in U.S. IPOs and almost three-quarters (74 percent) of investment bankers predict even more tech offerings during the second half of the year. More than two-thirds (69 percent) see the numbers of IPOs from the energy vertical increasing as well. By comparison, there is more modest support for the likelihood of growth in IPOs for the health care and biotech industries.

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