A BDO survey found that 30 percent of capital markets executives forecast an uptick in retail-consumer initial public offerings this year.
According to Ted Vaughan, partner in the Retail and Consumer Products practice at BDO USA, there are several encouraging signs that could boost IPO activity in 2013.
“The markets are more liquid, and there’s more stability. Those are strong factors for IPOs in general,” Vaughan said.
It helps too that, at least in the U.S., the presidential election is over, as is the impact of Hurricane Sandy and concerns over the fiscal cliff. All are factors that Vaughan said led to a temporary dip in consumer spending that resulted in solid, although not stellar, holiday sales.
Last year, the international front saw the flotation of Brunello Cucinelli SpA on the Italian bourse, and more could be on the horizon. Already there’s talk that Lapo Elkann, founder of Italia Independent, is eyeing the possibility of an IPO.
According to Vaughan, there are also private equity firms that have held on to investments longer than usual as they wait out the economic malaise that began in December 2007 hoping for a better exit strategy than just flipping an asset to another private equity buyer.
Data from Intrepid Investment Bankers indicate that in 2012 there were a total of 36 IPOs in Asia, 10 in Europe and 13 in the U.S. The data capture IPO activity across the retail-restaurants, apparel, footwear and accessories and beauty categories.
In the U.S. consumer space for 2013, Kellwood Co.-owned Vince has been mulling an IPO since October. Kellwood is owned by private equity firm Sun Capital Partners, although the Vince brand was acquired before the financial firm bought Kellwood.
Last week, Etsy hired Kristina Salen, a portfolio manager at Fidelity, as the firm’s chief financial officer. That’s a move that fueled speculation that the online marketplace for homemade goods is also looking to go public.
Should Etsy actually go public, that in turn could boost venture capital investment again, which saw a slowdown in the last quarter for fund-raising activity given what seemed to be a paucity of exit-strategy options for venture capitalists.
On the economic front, there also are positive indications that the IPO window could stay open for some time.
At a New York Society of Securities Analysts market forecast event last month, Sam Stovall, chief equity strategist at Standard and Poor’s, said that a Congress-induced recession risk has dropped to 15 percent, compared with a 20 percent to 25 percent risk late last year before an agreement on the fiscal cliff.
“The risk is to the upside rather than the downside,” he said, referring to economic growth going forward. His firm’s projection is for higher growth in the back end of 2013.
Also last month, at the Turnaround Management Association’s annual economic outlook presentation, Edward I. Altman, the Max L. Heine Professor of Finance at New York University’s Stern School of Business, said that “while [the U.S.] is clearly not out of the woods yet,” the chance of a recession here has diminished.
Altman also noted that while it was too early to tell, there are early indications of a sector rotation where the movement of investment money could be headed back to equities from the bonds.
That’s a move that could help bring new issues to market as optimism and an improved economy, as well as a rising stock prices, typically boost the flow of IPO offerings due to investor interest.
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