Merrill Corporation survey of Merrill DataSite® customers finds leading IPO attorneys nervous about slowdown in second half; fret over Internet “hype”
NEW YORK – The U.S. IPO market in 2011 has been stronger so far than it was in 2010, but it may be losing momentum entering the second half of the year, according to a new Merrill DataSite® survey.
An independent survey of American transaction attorneys conducted using Merrill DataSite®, the leading virtual data room (VDR) solution for business communication and information management, revealed that 64 percent think the second half of the year will be flat or weaker when compared with the first half. According to the survey, the most anticipated IPOs still to come in 2011 include Groupon® (35%), Facebook® (31%) and Zynga (6%).
“Increased IPO transaction volume throughout the first half of 2011 is a direct result of increased confidence in our country’s economy,” said Ed Bifulk, president of the Merrill DataSite® virtual data room business at Merrill. “As we move into the second half of the year, however, the number of IPO transactions may decrease, depending upon the economy, as well as the actions of many highly valued Internet companies and investor demand.”
The survey was an in-depth inquiry of approximately 40 U.S. securities attorneys who advise companies listed on major U.S. exchanges, and whose firms provided legal counsel to 81 percent of the domestic IPOs completed in the first half of 2011, representing 84 percent of the total transaction value. According to the results of the independent survey, 80 percent of securities attorneys polled think the U.S. IPO market will be slightly to much stronger in 2011 as compared to 2010, but anticipate that the second half of the year will be flat or slightly strong when compared with the first half. Despite the potential slowing of the U.S. IPO market in the second half of the year, survey respondents think that any improvements in the IPO market will be driven by an improving economy (70%) and investor demand for IPOs (20%).
“The increasing number of IPOs on file that we are currently seeing is a lagging indicator reflecting the strengthening of the U.S. economy in 2010,” said Joshua Ford Bonnie, partner, Simpson Thacher & Bartlett. “There are a lot of companies who are looking to leverage more favorable valuations that stabilized market conditions afford.”
Expectations for a robust market in the U.S. for IPOs in 2011 are stronger than in China and the UK. According to the survey, 55 percent of Chinese (and Hong Kong) and 70 percent of UK securities attorneys believe their local IPO markets will be flat or get weaker when compared with 2010.
Attorneys surveyed anticipate that technology and social media (60%) will drive IPO issuances in 2011, followed by energy (14%) and healthcare (11%). However, there are indications of a social media “bubble.” Survey respondents identified the IPOs of LinkedIn® (61%), Groupon® (26%) and Facebook (10%) as the most over-hyped.
Building on the improving strength of the U.S. IPO market, foreign companies are still looking to access the U.S. capital markets and list on major U.S. exchanges in addition to, or in lieu of, listing on their home exchanges, according to 77 percent of participants. Companies in emerging markets will continue to drive foreign issuance on U.S. exchanges, lead by China (58%), Brazil (12%), India (8%) and Israel (6%).
“We expect that foreign companies will, at least in the near-term, continue to list on U.S. exchanges due to more clearly defined listing rules and regulations, and the perceived stability and prestige of the U.S. markets," said Colin Diamond, partner, White & Case.
According to 85 percent of attorneys surveyed, private equity-backed companies are expected to dominate the IPO landscape in 2011. This increase will be driven by favorable market demand (44%), private equity demand for investment exits (36%) and improved valuations for companies looking to come to market (17%).
Other key findings from the survey include:
• 21% foresee some regulatory changes in the coming months that will impact equity issuance in 2011
• 60% think that Hong Kong foreign exchanges will be most dominant in 2011 listings. 28% think it will be LSE.
For more information on the Merrill 2011 IPO Outlook Survey contact merrill@kcsa.com.
*LinkedIn is a registered trademark of LinkedIn Corporation. Facebook is a registered trademark of Facebook Inc. Groupon is a registered trademark of Groupon, Inc.
About Merrill DataSite
Merrill DataSite® is a secure virtual data room (VDR) solution that optimizes the due diligence process by providing a highly efficient and secure method for sharing key business information between multiple parties. The Merrill DataSite® solution provides unlimited access for users worldwide, as well as real-time activity reports, site-wide search at the document level, enhanced communications through the Q&A feature and superior project management service – all of which help reduce transaction time and expense. Merrill’s multilingual support staff is available from anywhere in the world, 24/7, and can have your VDR up and running with thousands of pages loaded within 24 hours or less.
With its deep roots in transaction and compliance services, Merrill Corporation (www.merrillcorp.com) has a cultural, organization-wide discipline in the management and processing of confidential content. Through its Merrill DataSite® solution, Merrill is the first VDR provider to understand customer and industry needs by earning an ISO/IEC 27001:2005 certificate of registration – the highest standard for information security – and is currently the world's only VDR certified for operations in the United States, Europe and Asia. The Merrill DataSites® ISO certification is available for review at: www.datasite.com/security.htm.
As the leading provider of VDR solutions, Merrill has empowered nearly 2 million unique visitors to perform electronic due diligence on thousands of transaction totaling trillions of dollars in asset value. The Merrill DataSite® VDR solution has become an essential tool in an efficient and legally defensible process for completing multiple types of financial transactions.
About Merrill Corporation
Founded in 1968 and headquartered in St. Paul, Minn., Merrill Corporation (www.merrillcorp.com) is a leading provider of outsourced solutions for complex business communication and information management. Merrill's services include document and data management, litigation support, language translation services, branded communications programs, fulfillment, imaging and printing. Merrill's target markets include the legal, financial services, insurance, healthcare and real estate industries. With more than 5,000 people in over 40 domestic and 22 international locations, Merrill empowers the communications of the world's leading companies.
