Great work by BDU USA on the US IPO market for 2013 that includes interesting data on the impact of the JOBS ACT - minimal thus far. Enjoy.

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JAY DUKE, services, please contact one of
Markets Dallas
214-665-0607 leaders below:
the regional
jduke@bdo.com
2012
was a year of hills and valleys for the U.S. IPO Contact:
CHRISTOPHER TOWER, Orange County
714-668-7320
market. IPO activity was humming at peak levels ctower@bdo.com
JAY DUKE, Dallas
through April (58 deals), before the European debt 214-665-0607
LEE DURAN, San Diego
jduke@bdo.com
crisis, negative U.S. economic data and the problematic Facebook IPO brought 858-431-3410
lduran@bdo.com Diego
LEE DURAN, San
offering activity to a virtual halt. Activity began to pick up in July, only to tail off
858-431-3410
BRIAN ECCLESTON, New York
in mid-August and September as deal-makers took their traditional late summer lduran@bdo.com
212-885-8220
holiday. After a burst of activity in October (19 deals), uncertainty surrounding beccleston@bdo.com New York
BRIAN ECCLESTON,
the “fiscal cliff” led to the second slowest end of the year (just 10 deals in Nov/ 212-885-8220
LEE GRAUL, Chicago
Dec) in the past decade (only 1 deal in 2008).* beccleston@bdo.com
312-616-4667
lgraul@bdo.com
LEE GRAUL, Chicago
Although overall results showed a slight U.S. exchanges in 2013. Exactly half predict 312-616-4667
WENDY HAMBLETON, Chicago
improvement over 2011, the inconsistency of an increase in U.S. IPOs in the coming year, lgraul@bdo.com
312-616-4657
the market and the drop in proceeds absent although only 8 percent describe the increase whambleton@bdo.com Chicago
WENDY HAMBLETON,
the Facebook IPO, give the capital markets as substantial, while almost one-third (31%) 312-616-4657
DOUG SIROTTA, San Jose
community clear reason for concern as we forecast activity as flat compared with 2012. whambleton@bdo.com
408-278-0220
enter 2013. Just 18 percent expect a decrease in offerings dsirotta@bdo.com
CHRISTOPHER TOWER, Orange County
on domestic exchanges. Overall, bankers
714-668-7320
Robert Snape, Boston
predict a 6 percent increase in the number ctower@bdo.com
u 013 FORECAST
2 of U.S. IPOs in 2013. They anticipate these 617-239-4177
bsnape@bdocap.com
According to the 2013 BDO IPO Outlook offerings will average $250 million, which
survey, capital markets executives at leading projects to $34 billion in total IPO proceeds
investment banks are projecting measured on U.S. exchanges.
growth in initial public offerings (IPOs) on
*Renaissance Capital is the source of all historical data related to number and size of U.S. IPOs
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2. 2 2013 BDO IPO Outlook
 CONTINUED FROM PAGE 1
“In 2012, the number of U.S. IPOs was relatively flat with activity in 2011, but total proceeds raised were the
second most in the past ten years, trailing only the pre-crisis high of 2007. However, more than a third of 2012
proceeds were attributable to the Facebook IPO and, absent that offering, proceeds would have been the lowest
since the height of the financial crisis in 2009. If you remove Facebook from 2012 figures, the bankers’ projections
for the coming year represent an approximate 28 percent increase in proceeds.”
– Brian Eccleston, a Partner in the Capital Markets Practice of BDO USA
Compared to 2012, do you anticipate Absent the Facebook IPO, the size of the average offering was actually down
that 2013 IPO activity (# of IPOs) in significantly in 2012. What do you feel had the greatest impact on the smaller
the U.S. will... deal size?
Valuation pressures forcing offering
businesses to cut prices 47%
18%
Decrease
Smaller businesses pursuing offerings 31%
50% 31%
Increase Stay Businesses offering a smaller
about the 13%
percentage of company in deal
same
Other 8%
Source: 2013 BDO Board Survey Source: 2013 BDO Board Survey
u EAL SIZE
D u O THREATS
IP proportion (34%) highlight global political
and financial instability. High unemployment
Absent the Facebook offering, the size of the When asked to identify the greatest threat
(11%), constrained bank lending (10%) and
average IPO in 2012 was considerably smaller to a healthy U.S. IPO market in 2013,
competition from foreign exchanges (4%)
than 2011 and capital markets executives more than a third (37%) of capital markets
are identified as threats by small minorities
identified several contributing factors for executives cite the threat of tax increases
of the participants.
this trend. The most frequently cited factors and government spending cuts and a similar
were valuation pressures that forced offering
businesses to cut prices (47%), smaller
businesses pursuing offerings (31%) and What do you consider to be the greatest threat to a healthy U.S. IPO market in 2013?
companies offering a smaller percentage of
the business in the deal (13%).
Threat of tax increases and
37%
A good percentage of U.S. IPOs priced below government spending cuts
range in 2012 as discerning investors, in a
market plagued by sporadic activity, forced Global political & financial instability 34%
offerings businesses to cut prices. This trend
led to very positive investor returns which will
likely keep the pressure on valuations in 2013. High unemployment 11%
Almost a third of I-bankers see smaller offering
companies as a main reason for smaller deal Constrained bank lending 10%
sizes and, if the JOBS Act is successful in
encouraging more offerings from emerging Competition from foreign
businesses, this trend is likely to continue 4%
exchanges
going forward.
Other 4%
Source: 2013 BDO Board Survey
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3. 2013 BDO IPO Outlook 3
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u DUSTRIES
IN Proportions of Capital Markets Executives at leading Investment banks expecting U.S.
In terms of how individual industries will IPO activity to increase in 2013 in specific industries versus the percentage from 2012
fare in 2013, approximately two-thirds of survey.
the investment banking community are Industry % Projected 2012 Increase % Projecting 2013 Increase
predicting a continued increase in offerings Healthcare 50% 69%
in the healthcare (69%), technology (67%),
biotech (67%) and energy (65%) verticals. A Technology 73% 67%
lesser majority (54%) forecast a jump in real Biotech 59% 67%
estate offerings. No other industry is predicted Energy/Natural Resources 72% 65%
to achieve an increase in IPOs by a majority of
the survey participants. Real Estate 35% 54%
Industrial/Manufacturing 27% 33%
With healthcare reform moving ahead, home Consumer/Retail 23% 30%
prices rising in many regions and construction
activity beginning to pick up; the healthcare Media/Telecom 39% 29%
and real estate verticals experienced the Financial 16% 26%
biggest jump in confidence (+19%) when
comparing the 2013 and 2012 IPO forecasts
by industry. (See chart.)
u .S. vs. The World
U In 2012, IPOs on U.S. exchanges
For the fourth consecutive year, private equity The U.S. led all countries in IPO proceeds in represented approximately 40
portfolios (41%) are the most often predicted 2012, generating more than 40 percent of percent of total global IPO proceeds,
source for IPOs in the coming year. Venture global proceeds. Even without the Facebook a considerable increase from 2011. In
capital portfolios (24%), owner managed IPO, U.S. exchanges would have led all other 2013, do you think this percentage
privatelyheld businesses (16%) and spinoffs countries comfortably. When asked the will...
and divestitures (15%) are the other sources chief factor driving this trend, the capital
identified by the bankers. markets community identified an anticipated
improvement in the U.S. economy (33%),
When asked what offering attributes will be the European debt crisis (33%) and slowing
most valued by the investment community growth in China (23%). 24%
32% Increase
in 2013, 38 percent cite long-term growth
Decrease
potential and approximately one-third (32%) Moving forward, approximately one-quarter
say stable cash flow. Profitability (13%) and (24%) of I-bankers see U.S. exchanges
strength of industry vertical (12%) are cited by continuing to increase their percentage 44%
smaller proportions of participants. of global IPO proceeds during the coming Stay about
year. However an even larger proportion the same
(44%) believe the U.S. cut of the global pie
will remain about the same as 2012, while
approximately one-third (32%) anticipate the Source: 2013 BDO Board Survey
U.S. share declining in 2013.
“While deal activity in the U.S. was sporadic throughout the year, it compared very favorably to foreign
exchanges. Slow growth in China severely reduced government-backed IPOs on the Hong Kong and Shanghai
exchanges, while European exchanges remain captive to the continent’s sovereign debt crisis. Capital markets
executives are anticipating further improvements to the U.S. economy in 2013, and that will be the key to U.S.
exchanges maintaining a dominant position in terms of total global proceeds.”
– Lee Graul, a Partner in the Capital Markets Practice of BDO USA
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4. 4 2013 BDO IPO Outlook
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The bankers overwhelmingly (61%) cite Asia as
the geographic location most likely to spawn What one factor do you believe had the greatest impact on increasing U.S.
foreign-based IPOs on U.S. exchanges in 2013. exchanges share of total global IPO proceeds in 2012?
Latin America (15%), Europe (10%), Eastern
Europe/Russia (6%), Middle East (3%) and
Anticipated improvement in the
Africa (2%) were other regions cited. 33%
U.S. economy
In terms of IPOs taking place on foreign
exchanges, about one-third (32%) of European sovereign debt crisis 33%
investment bankers believe Hong Kong will be
the most popular in 2013. Shanghai (19%) and
London (17%) are the only other exchanges Slowing growth in China 23%
receiving double digit support.
Other 11%
u ULGE BRACKET
B Source: 2013 BDO Board Survey
Capital markets executives at the very
largest banks or “bulge bracket” firms mirror
the responses of the total capital markets
community on most topics. However, they
were much more likely (61% vs. 37% overall)
to view tax increases/spending cuts as the
primary threat to the U.S. IPO market in 2013
and twice as likely (65% vs. 32%) to predict
an increase in foreign-based offerings on U.S.
exchanges this year. They were also more
bullish (67% vs. 54%) on an increase in real
estate IPOs in 2013.
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5. 2013 BDO IPO Outlook 5
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“The survey clearly shows that the investment banking community is less enthusiastic about the JOBS Act than
it was immediately following the law’s enactment. In addition to the lack of a positive impact on IPO numbers,
the bankers indicate that the new law’s confidential filing provision has made it more difficult for them to advise
clients.”
– Wendy Hambleton, a Partner in the Capital Markets Practice of BDO USA
JOBS ACT
u JOBS Act Effectiveness?
One of the goals of the JOBS Act, enacted June 2012 December 2012
last April, was to increase the number of U.S. Do you believe the JOBS Act will be Thus far, have you seen evidence
IPOs by easing regulations and associated effective in increasing the number of that the JOBS Act will be effective in
costs for smaller emerging growth companies businesses going public? increasing the number of businesses
conducting offerings. Yet, less than one-third going public?
(29%) of capital markets executives at leading
investment banks believe the JOBS Act has
been effective in increasing the number of
IPOs on U.S. exchanges. This is a considerable 28%
29%
drop since last summer when a majority Too early
Yes
(55%) of I-bankers believed the JOBS Act 55% 45% to tell
would be successful in increasing the number Yes No
of businesses going public. Today, forty-two
42 %
percent of the bankers see no evidence that No
the new law is positively impacting IPOs,
while more than a quarter (28%) believe that
it is too early to evaluate the law’s impact.
Source: 2013 BDO Board Survey
According to the SEC, in 2012, more than
100 companies utilized the JOBS Act’s
confidential filing process to “test the waters” Moreover, investor groups are also giving
for a possible IPO. More than three-quarters the confidential filing process mixed reviews.
(80%) of I-bankers indicate that this lack of Almost half (48%) of capital markets
transparency has had a negative impact on executives report that investor groups are
their ability to advise clients on their offerings reluctant to meet with emerging businesses
due to a lack of information on potential that are confidentially testing the waters for
competitors for investment dollars. Although an IPO under the JOBS Act, as they prefer to
only 9 percent of the bankers describe this wait until the company has made a public
difficulty as “substantial” commitment to the offering.
About the Survey
The BDO IPO Outlook Survey and the BDO IPO Halftime Report are national telephone surveys conducted by Market Measurement, Inc.,
an independent market research consulting firm, on behalf of the Capital Markets Practice of BDO USA. Executive interviewers spoke directly
to 100 capital markets executives, using a telephone survey conducted within a scientifically-developed, pure random sample of the nation’s
leading investment banks.
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