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in Overview
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Trends in U.S. Initial Public Offerings from 1980 to 2011
CEOs and company directors regularly ask us, "When is the IPO market in the United States is coming back?"
A flurry of recent and planned IPOs has brought IPOs back to the front pages of the newspaper. The Courtney Group recently analyzed trends in the IPO market and what follows is our view of where we have arrived in 2011 and where we are headed.
The number of IPOs has decreased.
The number of IPOs has fallen in half since the peak years of 1981-2000, when there was an average of 621 IPOs a year. During 2001-2010, the average fell to 307 IPOs annually. Some people have referred to the period of the 1980s and 1990s as "the IPO Boom", and the period since 2000 as the "dot-com bust", but we feel this is overly simplistic.
On closer analysis, we see that the number of large IPOs has in fact remained fairly steady; it is the number of small deals that has decreased by 78%. Defining IPOs with over $50 million of proceeds as "large" and those under $50 million as "small", the number of large IPOs has stayed about the same (an average of 170 in 1981-2000 versus 208 in 2001-2010), while the number of smaller offerings declined substantially (452 in 1981-2000 versus 99 in 2001-2010). Chart A to the right, presents data on the number of IPOs annually from 1980 to 2011.
Proceeds from IPOs have increased.
In 1980, there were 144 IPOs (including that of Apple Computer) with total proceeds of $403 million, an average deal size of $9 million. Average proceeds from an IPO increased from $28 million in 1980 to 1989, to $63 million from 1990 to 1999, to $212 million from 2000 to 2009. In 2011 there have been over 300 IPOs with total proceeds of over $84 billion, and an average transaction size of $280 million.
If we are to again distinguish between large and small IPOs a parallel trend emerges. Since 2001, large IPOs have accounted for 98% of the capital raised in IPOs ($663 billion in large IPOs and $13 billion in small IPOs). Chart B to the right, has data on proceeds comparing large and small IPOs from 1980-2011.
We believe that the decline in small IPOs is a permanent change in the market and that owners of most companies under $250 million in revenues will need to consider recapitalizations, ESOPs, and mergers and acquisitions for their exit plans.
December, 2011
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