U.S. PE-backed IPOs Continue to Slow, But Offerings are Getting Bigger
October 22, 2015
The U.S. IPO market has slumped across the board lately, hurt by volatility across the public equity markets and alternative sale ramps proving more lucrative than a more complicated public offering process. Looking at private equity landscape, IPOs accounted for only 36% of all U.S. PE exits in 2015 through 3Q, a decade-low percentage and a far cry from the whopping 66% 10 years ago. But while PE-backed IPOs have declined in terms of completed flotations and aggregate capital raised, the median offering size is actually fairly inflated. According to PitchBook's inaugural U.S. IPO Trends Report, the median PE-backed offering size in 2015 through three quarters came in at $205 million, the second-highest number we've seen in a decade (behind the 2013 median of $234 million).
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Many portfolio companies have grown considerably in recent years and are ready to go to market with strong and large balance sheets. Yet, the size of these companies can play a significant role in how GPs are able to exit. Certain deals could simply be too large for a strategic or another PE firm to justify in terms of the current premium the sustained seller's market has supported. Thus, the spike in the median offering size for U.S. PE-backed IPOs isn't necessarily shocking, as many of these businesses hitting the exchanges are simply bigger.
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