Playing catch-up

Taking a global view, you'd likely form the conclusion that the IPO market is in good health. After all, the value of worldwide IPOs in the first nine months of 2006 increased to $140.6 billion (€111.9 billion) from $100.4 billion during the same period last year, according to data provider Dealogic.

But focus on the US alone, and here you'll find a discordant note being struck. In 2005, out of 24 IPOs globally that had a value of more than $1 billion, only one floated in New York. And things haven't improved much since. The third quarter of 2006, for example, saw 12 IPOs worth $3.5 billion, compared with 34 offerings worth $6.6 billion in the same period of the previous year.

Indeed, the US IPO market has slowed to such an extent that New York mayor Michael Bloomberg recently commissioned consulting firm McKinsey & Co. to find out why. The consulting gurus won't reveal their findings for a while yet, but there are many theories as to why firms looking to go public are unlikely to be in a New York state of mind.

Analysts cite a variety of reasons why London and other overseas markets are viewed by IPO candidates as more appealing. US investment bank underwriting fees are typically 6.5 percent to 7 percent, compared with the 3 percent to 4 percent norm in Europe and generally even lower fees in Asia. Another factor might be London's ability to transact deals in 60 milliseconds compared to 290 for the New York Stock Exchange (NYSE). In response to this, the NYSE earlier this year began gradually rolling out a new electronic trading system.

TABLE: 1 US IPOS: NUMBER OF DEALS BY QUARTER

PRICED VALUE $M NO.
2005 lQ 7,045.6 18
2005 2Q 3,661.8 21
2005 3Q 6,632.4 34
2005 4Q 2,644.3 17
2006 lQ 3,917.1 17
2006 2Q 5,660.9 24
2006 3Q 3,487-3 12

THE TOP 10 US SPONSOR-BACKED IPOS IN THE FIRST NINE MONTHS OF 2006

Issuer Value $m Exchange Sponsor(s)
Warner Chilcott 1,059.0 NASDAQ Bain Capital; DLJ Merchant Banking Partners;
JP Morgan Partners; Thomas H Lee Partners
Complete Production Services 717.6 NYSE SCF Partners
EXCO Resources 697.0 NYSE Oaktree Capital Management; Greenhill Capital
Partners; Cerberus Partners; Ares Management
Magellan Midstream Holdings 539.0 NYSE Madison Dearborn Partners; Carlyle/Riverstone
Global Energy & Power
Vonage Holdings 531.3 NYSE 3i Group; Bain Capital
Sealy Corp 515.2 NYSE Bain Capital; Kohlberg Kravis Roberts
Burger King Holdings 488.8 NYSE Bain Capital; Goldman Sachs Capital Partners;
Texas Pacific Group
Goodman Global Holding 487.1 NYSE Apollo Management; AlpInvest Partners
VeraSun Energy 482.7 NYSE EOS Private Equity
J Crew Group Inc 432.4 NYSE Texas Pacific Group

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