Securities Regulation Daily Wrap Up, STRATEGIC PERSPECTIVES—2013 was busiest year for IPOs since 2007, (Jan. 23, 2014)
Thursday, January 23, 2014

Securities Regulation Daily Wrap Up, STRATEGIC PERSPECTIVES—2013 was busiest year for IPOs since 2007, (Jan. 23, 2014)

By John Filar Atwood

While not quite reaching the pre-financial crisis heights of 2007, 2013 was a stellar year for IPOs with 237 deals; nearly 100 better that 2012’s 141 new issues. In 2007, 282 companies went public in the U.S., but the annual total plunged to just 52 the following year in the midst of the global crisis. In 2013, there was no slowing the IPO market, which surged in the fourth quarter on broad-based strength and momentum generated by Twitter’s impressive debut. The year also witnessed high profile IPOs by the likes of Container Store, AMC Entertainment, Hilton Worldwide, and Empire State Building owner Empire State Realty Trust.

Even with all of these recognizable names, Twitter was the most watched IPO of the year, and unlike Facebook in 2012, the stock debuted without a hitch and surged 73 percent in first-day trading. The company’s November 6, 2013, offering came on the heels of the busiest month of 2013 for IPOs (October with 34 deals), and buoyed the market to a solid finish. In the end, 77 of the year’s new issues (32 percent) were completed in the fourth quarter, a stark contrast to IPO fourth quarter performance in recent years—only 13 deals were completed in November and December 2012 combined.

The first quarter of 2013 was the slowest with only 34 IPOs, while the second and third quarters were balanced with 62 and 64 new issues, respectively. After October, the busiest months for IPOs in 2013 were May, with 29 offerings, and November, with 28. February (nine IPOs) was the only month that did not hit double digits in the number of completed deals.

Preliminary filings and RWs. The number of new registrants in 2013 was up significantly over the prior year with 272 preliminary filings compared to 150 in 2012. In such a strong market, it is not surprising that the number of withdrawals dropped substantially in 2013 to just 46 versus 85 the year before. It was the lowest annual RW total in the past decade.

Pharmaceutical preparations companies (SIC 2834) also provided one of the major story lines of the 2013 IPO market, as the industry’s IPO total nearly doubled the next closest business sector. Thirty-six pharmaceutical preparations companies went public in the U.S. in 2013 compared to 19 IPOs from the second-best segment, real estate investment trusts. Prepackaged software companies (SIC 7372), which had topped the list in 2012, fell to third in 2013 with 17 new issues. Blank checks companies, the top-ranked IPO segment in 2011, round out 2013’s top five with 10 deals.

Non-U.S. issuers. One IPO market trend that finally reversed in 2013 was the number of non-U.S. companies going public in U.S. markets, which had fallen in both 2011 and 2012. In 2013, 38 non-U.S. issuers made their public market debuts in the U.S., up from 23 the year before. After finishing second behind the U.K. in 2012, China regained its distinction as the top headquarter location for non-U.S. issuers listing on American exchanges. In 2013, eight Chinese companies went public in the U.S., while the U.K. was home to four new issuers. Israel finished the year second behind China with five U.S. IPOs by companies headquartered there.

Twitter generated the most headlines of any IPO in 2013, but with $1.82 billion in proceeds, it was only the fourth largest deal of the year. The top spot, by offer amount, was claimed by oil and gas partnership Plains GP Holdings, which raised $2.8 billion in its October 15, 2013, debut. In all, six issuers raised more than $1 billion in their 2013 IPOs. Hilton Worldwide Holdings’s $2.35 billion deal was the year’s second largest, followed by the $2.2 billion offering by Zoetis in January. Antero Resources ($1.57 billion) and ING U.S. ($1.27 billion) were the other companies that generated more than $1 billion in IPO proceeds during 2013.

Law firm rankings. After a two-year decline, the ranks of IPO active law firms in 2013 rose to 144 from 110 in 2012. The 2011 total was 117, down from 134 the prior year. In 2013, 15 firms reached double digits in the number of assignments, up from eight double-digit firms in 2012. Six law firms hit double digits in 2011.

Leading the way in the rankings for the third straight year in 2013 was Latham & Watkins. The firm also was co-leader by number of IPOs in 2010 alongside Simpson Thacher & Bartlett. Latham tallied 50 IPO assignments last year, nearly twice its 2012 leading total of 26. The firm’s representations accounted for 21.1 percent of the IPO market in 2013, compared to an 18.4 percent share the prior year.

Davis Polk & Wardwell once again claimed second place, as it had done in both 2011 and 2012. It served as issuer's counsel or underwriters’ counsel on 38 IPOs, 17 more than it had the year before. Cooley rose three spots in the rankings to claim third place with 23 representations, two better than Simpson Thacher. Simpson Thacher, 2013’s fourth-ranked firm, finished eighth in 2012’s year-end rankings.

Goodwin Procter also broke into the top five in 2013. Its 19 IPOs edged out Vinson & Elkins and Wilson, Sonsini, Goodrich & Rosati, each of which had 18 representations. Goodwin Procter’s ranking represents an improvement of two places over 2012, whereas Vinson & Elkins slipped one spot and Wilson Sonsini dropped three places. Skadden, Arps, Slate, Meagher & Flom worked as either issuer’s or underwriters’ counsel on 17 IPOs in 2013, down one from its 2012 total. As a result, the firm dropped five spots, from third to eighth, in the annual rankings.

Venable improved significantly over its 2012 ranking, moving up to ninth place from 16th. The firm benefited from the strong year for real estate investment trusts. All of Venable's 12 representations in 2013 were as issuer's counsel for REITs. Baker & Botts claimed the final spot in the 2013 top 10 with 11 representations. The firm had finished in ninth place in 2012.

Other law firms that showed significant improvement between 2012 and 2013 were Ropes & Gray, which climbed from 22nd to 12th place, and Gibson, Dunn & Crutcher, which ended the year in 13th place after finishing 39th the prior year. Hunton & Williams also gained ground in 2013. The firm moved into the top 20 in 19th place after finishing 2012 in 74th.

By aggregate proceeds generated in 2013, Davis Polk claimed the top spot with $13.71 billion, narrowly outdistancing Latham & Watkins, whose IPO clients raised $13.36 billion during the year. Davis Polk's total earned it a 24.4 percent share of the total 2013 IPO market. Simpson Thacher took first place in 2012 by virtue its work on Facebook’s $16 billion deal, but fell to fourth place in 2013. Its $9.07 billion in aggregate proceeds were slightly less than the third-ranked firm Vinson & Elkins ($9.22 billion in IPO proceeds).

Lead manager rankings. With business booming and non-U.S. companies coming back to U.S. markets, the number of investment banks acting as lead manager increased to 64 in 2013. It had dropped to just 37 in 2012, down from 44 in 2011. In 2010, 49 different banks served as lead underwriter. The number of lead managers with total IPOs in the double-digits improved slightly over the prior year (14 in 2013 and 11 in 2012).

Measured by number of IPOs, BofA Merrill Lynch unseated JPMorgan as the number one firm in the rankings with 68 deals brought to market. JPMorgan was close behind with 66 IPOs. BofA Merrill Lynch also was the 2013 winner as measured by aggregate proceeds. Its $28.09 billion in proceeds were about $1.5 billion better than second ranked JPMorgan.

By number of IPOs, Goldman Sachs improved to third place in 2013 from sixth the year before. It led 60 new issues in 2013, 25 more than in the prior year. Citibank served as lead manager on 54 deals in 2013, up from 38 in 2012, but its ranking slipped from second to fourth. Credit Suisse rounded out the top five with 51 IPOs.

Morgan Stanley, which had claimed the top spot in each of 2010 and 2011, finished 2013 with 50 deals, good for sixth place just behind Credit Suisse. Barclays Bank led 45 IPOs in 2013, and Deutsche Bank led 40, which kept both firms in the top 10 for the year. For each of the past four years, the top eight lead managers have stayed the same, with slightly shuffled rankings in each year.

After Deutsche Bank, the next highest IPO total for any investment bank was Wells Fargo’s tally of 20. UBS and Jefferies were right behind with 19 deals each, leaving the banks ranked 10th and 11th, respectively, which is about the same ranking they held at the end of 2012.

Some of the year’s most lucrative deals were spread among multiple co-lead managers. Twitter’s underwriting syndicate included five lead underwriters—Goldman Sachs, Morgan Stanley, JPMorgan, BofA Merrill Lynch, and Deutsche Bank. Goldman Sachs, JPMorgan, and BofA Merrill Lynch also served as co-leads for Plains GP Holdings, 2013’s largest IPO. Plains GP Holdings also enlisted Barclays, Citibank, UBS, and Wells Fargo as co-leads on its October 2013 offering.

IPO auditors. The number of accounting firms acting as IPO auditor rebounded in 2013 to 17 after falling to just 12 in 2012. As always, the Big Four firms occupied the top four spots in the rankings. BDO International finished fifth, but was 17 IPOs behind fourth place finisher KPMG.

In 2013, Ernst & Young easily held onto the number one ranking for the fourth consecutive year. While it had to resort to a tiebreaker to win in 2012, it finished 2013 40 deals ahead of its closest competitor, PricewaterhouseCoopers. Ernst & Young’s tally for the year was 87, compared to its leading total of 36 the prior year. The audit firm claimed 36.7 percent of the IPOs for the year, and 33.7 percent of the proceeds. Interestingly, even with 51 more deals in 2013, Ernst & Young’s total proceeds of $18.94 billion fell short of the $23.37 billion it raised the previous year. The firm’s 2012 number reflects its work on Facebook’s multi-billion dollar IPO.

Though far behind in the number of deals, PricewaterhouseCoopers’s aggregate proceeds were $15.1 billion, $4 billion behind Ernst & Young. No other auditor broke the $10 million mark in aggregate proceeds for the year. KPMG’s 28 IPOs generated more proceeds than Deloitte’s 31 deals, but Deloitte retained its number three ranking and KPMG stayed in fourth place. Grant Thornton had finished in fifth place in 2011 and 2012, but fell to sixth in 2013. Its nine deals were two short of the annual total posted by BDO International.

Nine of the top 10 auditors remained the same from 2012 to 2013. One change was that Plante & Moran entered the top 10, though only having worked on one IPO. Its $120 million in proceeds exceeded the other eight audit firms that tied with one deal in 2013. The firm was not ranked in 2012. McGladrey Pullen held onto the number nine spot in the rankings, while Deloitte dropped out of the top 10.

The information reported here was gathered using IPO Vital Signs, a Wolters Kluwer Law & Business database that includes all SEC-registered IPOs, including REITs and those non-U.S. IPO filers seeking to list in the U.S. markets. IPO Vital Signs does not track closed-end funds, best efforts, non-underwritten deals, or IPO offerings for amounts less than $5 million.

Attorneys: (Latham & Watkins). (Simpson Thacher & Bartlett). (Davis Polk & Wardwell). (Cooley). (Goodwin Procter). (Vinson & Elkins). (Wilson, Sonsini, Goodrich & Rosati). (Skadden, Arps, Slate, Meagher & Flom). (Venable). (Baker & Botts). (Ropes & Gray). (Gibson, Dunn & Crutcher). (Hunton & Williams).

Companies: Twitter, Inc.; Container Store Group, Inc.; AMC Entertainment Holdings, Inc.; Hilton Worldwide Holdings Inc.; Empire State Realty Trust; Facebook, Inc.; Plains GP Holdings, L.P.; Zoetis Inc.; Antero Resources Corp.; ING U.S., Inc.; BofA Merrill Lynch; McGladrey Pullen; Deloitte; Deutsche Bank; JPMorgan; Wells Fargo & Co.; Goldman Sachs & Co.; Barclays PLC; Citibank; UBS; Ernst & Young; Credit Suisse; KPMG; Morgan Stanley & Co., Inc.; Jefferies; Grant Thornton; BDO International; Plante & Moran; PricewaterhouseCoopers LLP

MainStory: IPOs SecuritiesOfferings

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