Mega IPOs Seen Fading in 2015 After Billion-Dollar DealsLeslie Picker
Big deals dominated the U.S. initial public offering market in 2014, with more billion-dollar sales than any year since the dot-com bubble. It’s a trend that’s unlikely to carry over to 2015.
From Chinese e-commerce giant Alibaba Group Holding Ltd. to U.S. lender Citizens Financial Group Inc., 16 companies generated IPO proceeds that topped $1 billion, according to data compiled by Bloomberg. That’s the most since 2000 when 17 companies surpassed that threshold.
Two companies that may conduct IPOs in 2015, and are likely to cross that size threshold, are Univision Communications Inc. and First Data Corp., people with knowledge of the matter say. Still, large deals will be less common as private-equity firms have already listed many of the companies swept up during the buyout wave that ended in 2007, and the U.S. government has done the same with businesses it bailed out during the financial crisis that followed.
“The last several years of the IPO market have been driven mostly by large government sell-downs and sponsor-backed exits,” said Brian Reilly, head of global equity capital markets at Barclays Plc. “Those are behind us, for the most part, so this year should be driven by a larger number of smaller-sized deals.”
One large deal that isn’t likely to be matched any time soon is Alibaba’s record $25 billion sale in September. Though researcher CB Insights counts 42 venture capital-backed companies that have valuations above $1 billion, ample cash in the private market means many will be able to defer IPOs.
Candidates for the next high-profile IPO include Xiaomi Corp., China’s largest smartphone vendor, as well as mobile car-booking company Uber Technologies Inc., which were valued at more than $40 billion each in their latest private funding rounds. Airbnb Inc., the room-rental service for travelers, and Snapchat Inc., which allows users to send disappearing photos and videos, are said to be valued at $10 billion.
Any of these could raise more than $1 billion in an IPO, though it’s unclear if they’ll be seeking debuts this year.
Among the largest private-equity exits of 2014 were IMS Health Holdings Inc., a health-care focused data provider backed by TPG Capital Management, and Carlyle Group LP’s auto-paint company Axalta Coating Systems Ltd.
Those added to about $140 billion of private-equity backed IPOs in the past four years, or about two-thirds of total IPO volumes.
Univision, First Data
“Private equity will probably be less active as a percentage of total issuance early,” said Mark Hantho, global head of equity capital markets at Deutsche Bank AG.
New York-based Univision, which is co-owned by Grupo Televisa SAB and firms including Saban Capital Group Inc., could be among those that tap public markets this year. Televisa executives have said those firms will want to sell their stakes, potentially in an IPO, though it hasn’t made any public moves to do so yet.
First Data, which was acquired by a KKR & Co.-led group for about $26 billion in 2007, could also come to market in 2015, people with knowledge of the matter have said. Neither First Data nor Univision have officially started the IPO process, the people said, asking not to be identified discussing private information.
Representatives for Univision and First Data declined to comment.
The U.S. Treasury conducted the last major IPO of the businesses it bailed out during the 2008 financial crisis by selling shares of Ally Financial Inc. in May. The government raised $2.6 billion in the IPO of the former financial arm of General Motors Co., and another $1.28 billion after disposing its remaining stake in December.
Big deals were also derived from corporate carve-outs, or companies divesting businesses as IPOs, many from the financial services industry. GE Capital, Royal Bank of Scotland Group Plc and Banco Santander were among the beneficiaries of a combined $8.5 billion in proceeds from IPOs of their subsidiaries last year.
“You’ll continue to see activity there, but the largest transactions this year probably won’t be finance because the largest ones have already come to market,” said Doug Adams, co-head of equity capital markets for the Americas at Citigroup Inc.