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IPO outlook from Ernst & Young

Strategic Growth Markets

June 2013

Ernst & Young IPO Insights

Improved investor condence and highervaluations this quarter really openedthe window for effective IPOs as well asencouraged new registrants into the pipeline.This quarters results through June 14,

2013 have exceeded Q1 2013 by deal sizeand performance. New registrants includingcondential lings made public were up 86%and IPOs that went effective were up by 45%.New registrant proceeds were up 189% andproceeds from effective IPOs were up 38%.Even though Q2 has always been historicallya strong quarter forIPOs in general, thissecond quarter hasbeen more robustthan expected.Despite recent

market volatility,I am optimistic that

the energy that has surrounded the marketswill carry into Q3, and with Q4 also beinghistorically strong, that should give us themomentum to end 2013 on a high note.

The number of new registrants into thepipeline is up from Q1. These companies areraising more capital and are strong candidatesto go public in 2013 due to higher liquidityand valuations. Currently, 14 IPOs are pricedto raise more than $6.5 billion in the comingweeks. The strong U.S. IPO market alsoattracted foreign private issuers, (FPI). TwelveFPIs led for IPOs in Q2 compared to six in Q1and two in Q4 2012.

IPOs backed by private equity, (PE), andVenture Capital (VC) rms represent 52% ofthe deals in Q2. In fact,7 of the top 10 dealsin 2013 were PE backed, a function of PElooking to make exits from investments at thebeginning of the recession. So far this year, PErms have spent $35.9 billion in Technologysector deals, making it the second most

active by value. Consumer products is themost active sector this year by value, with 61deals with a combined value of $42.3 billion.Moreover, retail investments have attractedanother $7.9 billion. Collectively, they account

for nearly 40% of total PE spend year-to-date.

Condence in the markets has givenencouragement to companies across a diversemix of sectors to take advantage of an IPO.A few trends include the re-emergence of theLife Sciences sector which had been quietfor some time. Earlier stage bio-pharma

companies aretaking advantage ofthe capital marketsas they have beenable to raise a goodamount of capital.Because of the JOBS

Act they are considered emerging growthcompanies and many are taking advantageof the opportunities the legislation allows.In the U.S, Health care is dominating withFinancials a mix of banks, nancial servicesand brokerage rms coming in at a closesecond. Rounding out the top four sectors isTechnology and Real Estate. Technology is afast growing sector with companies still tryingto position themselves for changes the cloudand mobility have brought about. The realestate market continues to be on an upswingin the U.S. and Canada.

Recently, weve seen an increase in marketvolatility. However investors are out there

looking for competitive pricing, the rightmanagement team to instill condence,and a good company story. The window ofopportunity can open and shut at a momentsnotice, but I expect well see continued IPOactivity in the second half of the year.

For more information, please visit ourGlobal IPO Center of Excellence online.

IPO market open for business

New registrants including condential

lings made public were up 86% and

IPOs that went effective were up by 45%

Jacqueline Kelley

is an Advisory

Services partner for

Ernst & Young LLP

in Orange County,

California, and the

Americas IPO Leader

for the Strategic Growth Markets

practice. In this role, she is responsible

for leading a practice serving

IPO-bound companies. With more than

20 years of experience, Jackie has

an extensive background in providing

audit and advisory services to private

and public companies, including SOX

404 implementations, annual nancial

audits, business process reviews and

IPO readiness services. Jackie is a CPA

in California. She received a Masters

in Accounting from the University of

Southern California.

For more information on Ernst & Young

Strategic Growth Markets,

please contact Jennifer L. Compton

at +1 201 872 1294 or at

jennifer.compton1@ey.com.

>Jacqueline KelleyAmericas IPO Leader

>Contact us today

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2IPO outlook from Ernst & Young Strategic Growth Markets | June 2013

Ernst & Young IPO Insights

Performance review IPOsreach higher valuations in Q2

1st day average return

IPOs in Q2*

7.5%

3.7%

1.6%

10.0%

IPOs in Q10%

2%

4%

6%

8%

10%

12%

14%

S&P 500 return

Outperform S&P 500

Q2 effective IPOs by sectorAs of June 14, 2013

No. ofIPOs

Proceeds($mm)

Health care 8 490

Financials 7 2,440

Technology 5 581

Real estate 5 875Materials 4 883

Consumer products and services 4 1,871

Energy and power 3 699

Industrials 3 1,153

Telecommunications 2 498

Media and entertainment 1 807

Retail 1 204

Total 43 10,501

Top 2013 IPO sectors

Health care Financial services

Technology Real estate

Number of new registrations

67

36

86%

Q2 2013*Q1 2013

Number of effective IPOs

48

3345%

Q2 2013*Q1 2013

Effective IPO proceeds $mm

$11,864

$8,57238%

Q2 2013*Q1 2013

Proceeds from newregistrations $mm

$15,692

$5,431

189%

Q2 2013*Q1 2013

* New registrations include confidential filings that were made public as ofJune 14, 2013. Q2 data as of June 14, 2013.

Q2 opens window forIPO opportunities in US

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3IPO outlook from Ernst & Young Strategic Growth Markets | June 2013

Ernst & Young IPO Insights

Top 2013 VC-backed IPO sectors

Technology Health care Financial services Consumer products

What is on investors minds?

Key critical success factors for an IPO*

Listing venue selection

Reputation of the banking sydicate

Readiness to provide transparencyand good corporate governance

Right timing

Size of the transaction

Compelling equity story

Confidence in management

Attractive pricing 91%

57%

65%

35%

29%

9%

7%

2%

Key concerns for IPO candidates*

Not enough preparation for investorcommunications and meetings

Incomplete infrastructurepreparations pre-IPO

Listing not conducted at theright time

Listing at too young or too early a

stage in a companys life cycle

Issuer not having the rightmanagement

Overpricing of stock at IPO 85%

56%

43%

40%

30%

29%

Factors that drive investors interest and

motivation to invest in new listings*

Recent IPO or follow-on activity

Confidence in theregulatory system

Inflow and availability of funds

Confidence in theeconomic system

Current valuation level

Companys market opportunityto seize growth

90%

83%

46%

25%

16%

16%

* Note: Percentage represents the number of respondents that chose the particularfactor as one of their top three choices. Source: Ernst & Young Institutional InvestorSurvey: Right team, right story, right price 2013

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Ernst & Youngs Strategic Growth Markets (SGM) services guides

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