Friday, January 29, 2010

I.P.O. Market Begins to Regain Its Luster

NYT DealBook, January 29, 2010, 4:10 pm — Updated: 4:10 pm -->

The I.P.O. pipeline in the United States is filling up as companies once afraid of braving the capital markets are now lining up to for initial public offerings. A fair number of these companies, especially in the financial industry, are looking to spin off businesses at lucrative prices.
The drought in I.P.O.’s reached its peak earlier last year during the financial crisis, with weeks and months going by without one offering hitting the market. Companies feared that the volatility and uncertainty in the financial markets meant that any offering, no matter how strong, would probably get hammered.
But by the fourth quarter, things were looking up. A total of 53 companies seeking to raise a collective $10.3 billion filed registration statements in the fourth quarter expressing their desire to go public, a two-year high, meeting pre-recession levels, according to Ernst & Young. And 32 companies hit the market in the fourth quarter, raising a sizable $17.4 billion, compared to just one company that went public in the fourth quarter of 2008, raising a tiny $144 million.
The upward trend does not seem to be a fluke, as Dealogic reported Friday that there were now 75 I.P.O.s in the pipeline looking to raise $13.6 billion. But what could be even more interesting is the number of companies getting ready to file.
“We have a pent-up demand to serve companies that are preparing for or are considering an I.P.O.,” Maria Pinelli, the Americans director of Ernst & Young’s strategic growth markets division, told DealBook.
Currently, technology companies are leading the I.P.O. market, but financial services companies could be a major contributor to future offerings, Ms. Pinelli said. While she would not talk specifically about any one company her firm is working with, Ms. Pinelli did say that many large companies were considering spin-offs of strong parts of their businesses to take to the stock market over the next two quarters.
Large financial firms may see spinning off a business unit as a better way to unlock its value than selling it to rival at a reduced price. Both Citigroup and the American International Group have said that they want to sell parts of their businesses to raise money to pay off government bailout money, but that they are waiting to do so when the time was right. That time may be coming soon via the stock market.
– Cyrus Sanati

Brrrr. M&A Volume Still Caught in the Deep Freeze

WSJ, Deal Journal, Jan. 29, 2010:
Where is that M&A recovery?
Global deal volume through Jan. 28 is down 17% from the year-earlier month. And the U.S. was the worst performing region, down 72% and on par with the lows of last summer, according to Dealogic.
True, the year-earlier month included Pfizer’s $68 billion purchase of Wyeth, accounting for 31% of that month’s volume. Still, wasn’t 2010 supposed to be the year the deal market began its comeback? So what does this mean?
As Deal Journal has said before, the deal market is unlikely to come roaring back. Instead, the M&A market should show a “gentle recovery” in 2010. Sure, there are plenty of positive signs: Many corporate buyers are sitting on hordes of cash; the credit markets have improved, and banks are lending again for M&A, albeit selectively. Also, private equity should be more active as both buyers and sellers, and, perhaps more importantly, corporate executives are increasingly considering M&A.
Still, there is one large caveat: Deal activity will go the way of economy–both on the upside and downside.
So what will the M&A market look like this year? Probably a bit like 2004, according to a Robert W. Baird study. That was the year Cingular snagged AT&T Wireless, J.P. Morgan bought Bank One and BofA scooped up Fleet.
Anyway, here are some tidbits from Dealogic’s monthly M&A data:
The Latin American and Caribbean deal market has been the hottest, up 573%, thanks to the America Movil’s acquisition of Carso Global and Heineken’s purchase of FEMSA.
Overall, M&A activity in emerging markets is up 170%.
Credit Suisse Group stands atop the global league tables; Citigroup is atop the U.S. rankings.
Energy investment bank Tudor, Pickering Holt & Co. sits third in the U.S. league tables and sixth world-wide. It advised on Williams Cos.’s deal to merge two of its natural-gas pipeline and energy-processing affiliates.
The value of announced deals involving Chinese targets is up 93%.
Copyright 2008 Dow Jones & Company, Inc. All Rights Reserved