The tap is open, the good times are rolling and the green stuff is flowing.
Monday in New York it was green beer, but as far into 2014 as sources care to speculate, it's cash, as the initial public offering pipeline has been propped wide open and offerings large and small are coming at a rate unseen since before the financial crisis.
However, it could also be that, just like with St. Patrick's Day, one too many has been poured. On Sunday, Alibaba.com Corp., the premier Chinese e-commerce company, revealed it would list the largest IPO since Facebook Inc.'s 2012 offering in the United States. Last week Weibo Corp., the Chinese version of Twitter Inc., filed to list in the U.S. as well. And on Friday, Castlight Health, the healthcare software firm, saw shares rocket up almost 150% on its debut day.
Last year, the 222 companies that raised about $55 billion in the U.S., according to Renaissance Capital, were the most by volume the market has seen since 2000 (2013's IPO value count fell slightly short of 2007). Nor is there much concern about a slowdown this year, sources say -- with, and possibly even without the behemoth Alibaba.com IPO that is expected in the U.S. later this year, both the volume and value record could get squished in 2014.
More of it could come on PE-backed exits: the 182 private equity IPOs in the U.S. and Europe in 2013, valued at more than $56 billion, represent 35% of global proceeds, according to data from Ernst & Young. Put another way, more private equity companies are pushing IPOs, and from the looks of it, a lot more are on the way.
To start the year off, PE IPO performance has been strong, marking through mid-February a 25.1% rise, according to a recent Ernst & Young LLP study.
Zoe's Kitchen USA LLC, a Brentwood Associates-backed Mediterranean kitchen, will raise up to $80.5 million in its IPO, coming soon. Brentwood bought into Zoe's for undisclosed terms in 2007, when it had less than 20 stores, along with industry exec Greg Dollarhyde. The company took on a $20 million credit facility from GE Capital Corp. in 2011 before readying its paperwork -- and increasing store count five-fold.
Next up, it looks like retail eatery investors will be able to sample Lee Equity Partners LLC's Papa Murphy's International Inc., looking to raise $70 million in its IPO, despite a recent history of losses.
But it hasn't just been tasty offerings like Bloomin' Brands Inc., Noodles & Co. or Potbelly Inc. that investors have been eager to bite into. In 2007, Welsh Carson Anderson & Stowe bought the majority stake in an Oklahoma-based payroll provider Paycom.Net LLC. The company filed IPO paperwork earlier in March to raise up to $100 million -- likely making the sponsor a winner on paper by the time shares list on the New York Stock Exchange -- having taken in $108 million on the top line last year.
At long last, the IPO market is back, even for the middle market.
That's welcome news to LBO shops that have long held onto costly assets. The good news for public market investors is that the five biggest private equity offerings of 2013: Envision Healthcare Inc., H.D. Supply Inc., Quintiles Transnational Holdings Inc., Antero Resources Corp. and Hilton Worldwide Holdings Inc., each traded up since their debuts.
Last year also gave private equity opportunities to take advantage of markets' rise and the beginning of the end of the Federal Reserve's bond buying stimulus. Some GPs didn't hold back.
"We're selling everything that's not nailed down," Apollo Global Management LLC CEO Leon Black said at a 2013 conference.
Other PE pros followed Black's example, bringing out IPOs from CDW Corp. to Hilton. Next, the large-cap LBOs are expected to flow back into public markets. This includes GrubHub Inc., which was split from Aramark Corp., a 2007 deal, before its sponsors prepped a pair of public offerings.
J. Crew Group Inc., too, as The Deal reported in late 2013, is joining the fray of PE offerings now being prepped -- it, like Party City Corp. and GoDaddy.com, is a relatively quick flip for the LBO shops that invested.
Plus, GPs are equally eager in the last 12 months to sell their own firms' stock into a rising market. That includes senior execs at Black's Apollo (apparently, the founder shares were also not "nailed down"), Oaktree Capital Management LP, Fortress Investment Group LLC and the Carlyle Group.
Private equity is taking advantage of heady valuations in international markets as well: earlier in March, specialty insurer Apollo and CVC Capital Partners Ltd.-backed Brit Insurance Holdings NV revealed plans for a London Stock Exchange IPO, marking a win for large-caps. Also in London, Apax Partners' Travelex Holdings Ltd. as well as its King.com, maker of popular mobile game Candy Crush, are reading offerings.
Jeremy Swan, private equity practice principal at accounting and advisory firm CohnReznick, says he's not expecting a big market hangover to come from overconsumption of under-baked offerings.
"I haven't seen a lot of companies rushing to get there," he said.
Freshfields Bruckhaus Deringer LLP lured M&A lawyer Peter Lyons from Shearman & Sterling LLP, where he was a partner since 1989. For other updates launch today's Movers & shakers slideshow.
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