IPOs at Five-Year High

The pipeline into 2007 remains strong, says a new report from Ernst & Young.

It’s getting to look a little like 2000, at least when it comes to the IPO market.

Through November, U.S.-based companies completed 186 initial public offerings, generating $34.2 billion in proceeds, according to a report issued by Ernst & Young. The total represents a 14 percent jump from through November 2005, when IPO activity reached $29.9 billion. The latest total is the most amount of capital raised by U.S. domiciled companies since 2000—when $59 billion was raised in 338 IPOs during the same 11-month period, according to E&Y.

This is not too surprising given that the U.S. equity markets, in general, have been on a tear since the summer, and IPO activity historically tracks overall stock market sentiment. The deal size is also growing. The median size of this year’s IPOs, for example, is $96 million, which is 9 percent larger than the median deal in 2005. The average deal size this year is $184 million, up 13 percent from last year, according to the report.

There were also a number of $1 billion-plus deal in 2006, led by MasterCard Inc. ($2.5 billion), Spirit Aerosystems Holdings ($1.6 billion), Hertz Global Holdings Inc. ($1.3 billion), SAIC Inc. ($1.2 billion), and Warner Chilcott Ltd. ($1.0 billion). Keep in mind that E&Y did not include in its totals the IPOs by KKR Private Equity Investors LP ($5 billion raised) and Apollo Alternative Assets LP ($1.5 billion raised), asserting that they are not operating companies.

What were the sources of the IPOs? E&Y points out that 30 percent of all U.S. domiciled IPOs were venture-backed, which it asserts “underscores the role of the U.S. venture capital industry in providing companies with the resources needed to reach the public markets.” From an industry-standpoint, financial services was the most heavily represented, with 45 IPOs, followed by healthcare (34), and energy and power (26).

On the other hand, consumer products and services ($6.9 billion raised), energy and power ($6.7 billion), and financial services ($5.5 billion), were the top sectors in total capital raised. Looking ahead, the pipeline remains strong. According to the E&Y report, as of December 1, 114 companies had filed to raise over $21 billion. That’s more than half of what was raised in all of 2006, according to E&Y.

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