October 31, 2013
Interviewed by: David Snow
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PE-Backed IPOs in Q3 2013

Michael Rogers, EY‘s Global Deputy Sector Leader, discusses how 2013’s strong economic forecast performed for global IPOs and how 2014 is looking.

Michael Rogers, EY‘s Global Deputy Sector Leader, discusses how 2013’s strong economic forecast performed for global IPOs and how 2014 is looking.

PE-Backed IPOs in Q3 2013
With Michael Rogers of EY

David Snow, Privcap: 

We’re joined today by Mike Rogers of EY. Mike, welcome to Privcap today. Thanks for being here. Your firm has just put out a study of private equity backed IPOs around the world. I’m very interested to hear what that study says because obviously, IPOs are a critical way that private equity firms monetize their investments. What does the study say starting with the biggest markets in US and Europe?

Michael Rogers, EY: 

Thank you, David. I noticed that in the first quarter of this year, we had a pretty good market, but the second quarter really was very, very strong in the developed world. In the US and in EMEA, the markets came back very strongly. In the third quarter, it has moderated back a bit and we think that’s due to some economic issues that are out there today.

Snow: Well, is it safe to say though that the IPO markets are “back” as an exit source for private equity firms?

Rogers: I think so. The issue that we see mostly is around the ability to have an open market, if you will. Valuation seems to be stronger because the stock market has been up pretty regularly this Fall. However, with some of the headwinds that we’ve faced, particularly in the US, around either the slim-down in the government that we’ve been experiencing there or the discussion of tapering has sort of held back the market a bit. There is a big queue of companies, IPOs that would like to get out there, that private equity would like to release and their just sitting on the sidelines a bit right now.

Snow: Final question: Putting the PE-backed IPO market into a global perspective, if certain macroeconomic and perhaps, some regulatory conditions break the right way, what do you predict for IPO activity globally?

Rogers: I think the opportunity is there for a very robust 2014. The number of overhang companies that are still in portfolios in private equity around the world is very, very significant. 62% of the companies that were purchased in the ‘06/’07 height of the market, if you will, are still in private equity hands and in their portfolios. They’d like to exit those companies. They need to have robust IPO markets and capital markets to do so. We feel like there are a number of opportunities.

The investors we are talking to and the PE funds that we are talking to are telling us that they’d like to get out in the market and have some of these successful exits. They just need the right combination of the market being open and also the economic fundamentals behind it.

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