Tech, Health-Care Firms Dominate IPO Market

The two sectors account for nearly half of U.S. initial public offerings so far in 2011.

Technology and health-care companies are expected to keep the tempered market for initial public offerings active this year. At the end of February, those sectors topped the list of the 150 companies waiting to list on U.S. exchanges, notes a recent Ernst & Young report.

Moreover, as of mid-March, nearly half of the 21 IPOs made so far this year by U.S. companies were in technology and health care, according to Thomson Reuters data provided to CFO (see charts below). In 2010, tech and health-care companies in the United States raised a combined $3.55 billion through IPOs but were outperformed by energy companies and industrial companies. (Results for the industrial sector were skewed by General Motors’s $18.1 billion IPO, considered to be the second-largest in U.S. history, E&Y notes.)

Technology companies dominate largely because of the wide range of businesses that fall under that label, notes Jackie Kelley, E&Y’s Americas IPO leader. “The technology industry is constantly changing and evolving,” she adds.

Kelley believes the IPO market is “on the edge” of a resurgence, partly based on the number of clients her firm is helping to prepare IPO registrations. “We’re expecting [the IPO market] to be fairly vibrant this year, barring any sort of unusual economic turn,” she says. Companies aren’t waiting as long to get to market, she adds, as the average deal in the United States is now taking three months, as opposed to the nine-month wait many companies had over the past two years.

To be sure, fewer U.S. companies have gone public in recent years. In 2010, 124 U.S. firms made IPOs, the highest number since 2007, when 207 U.S. companies went public, according to Thomson Reuters. In the two-year span between 2008 and 2009, only 83 companies did so.

In fact, the number of companies already listed on U.S. exchanges has dwindled as well, as CFO recently reported. As of February, 5,091 companies were listed on major U.S. exchanges, a 2% decline from the number of public companies at the end of 2009, according to Grant Thornton.

IPO charts 3-25

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