Investment bankers are gearing up for a pickup in dealmaking activity in global equity capital markets this year, buoyed by a promising pipeline of anticipated initial public offerings of several high-profile companies.
Liquefied natural gas producer Venture Global, privately held medical supply giant Medline, and cybersecurity company Sailpoint, backed by private equity firm Thoma Bravo, are expected to headline a crowded line-up of stock market flotations in the first half of 2025, according to people familiar with the matter.
An increase in capital markets activity, driven by improving economic confidence, is expected to be a major boon for several of these private equity-backed companies.
Private equity firms have been struggling to sell or list portfolio companies over the past two years due to high interest rates and volatile stock markets that put a chill on dealmaking.
"Many of the companies owned by private equity firms have become sizeable," said Arnaud Blanchard, global co-head of equity capital markets for Morgan Stanley. "Sponsors know it may take a while to complete a full exit, so they are becoming active now, early in the cycle."
Other buzzy names that could potentially go public in the U.S. this year include the likes of Swedish payments firm Klarna, artificial intelligence cloud platform CoreWeave, and financial technology firm Chime, which confidentially submitted paperwork for its flotation in December, the sources said.
The largest private equity firms have become more bullish about IPOs of their portfolio companies in recent months.When major U.S. banks report earnings next week, investors will focus on the outlook for capital markets, which had a surge of activity last year.
Global equity issuance rose 20% last year, but stock market launches have so far lagged that increase, remaining far below their 2021 peak. IPOs raised $123 billion last year, compared with a record-breaking haul of $594 billion in 2021, according to Dealogic.
Moreover, Wall Street's most-watched gauge of investor anxiety, the Cboe Volatility Index (.VIX), is currently at a relatively low level of about 18, raising expectations of a near-term upswing in capital markets.
LARGER DEALS
Bankers are expecting more large IPOs, which typically refer to share sales worth $750 million and above, and are appealing because they often feature established companies with strong financial performance and offer greater liquidity to investors.
“IPOs, on average, are likely to be larger in size perhaps than they ever have been," Brian Friedman, president of Jefferies, told Reuters in an interview.
Bankers also expect the 2025 surge in IPOs to reach across a broad swathe of sectors.
"Investors continue to favor scaled, profitable companies with sensible balance sheets and durable cash flows, especially as rates may be staying higher for longer," said Matt Warren, Bank of America's head of Americas equity capital markets cash origination.
While valuations have risen, many startups backed by private equity firms are still falling short of their targeted returns, said JPMorgan Chase president Daniel Pinto.
"A lot of the companies in the sponsor books, even with these valuations, are not able to produce a good enough exit for these investments," he said. “Private equity firms can unlock value in several ways, including small stake sales in IPOs, which can then be used for a strategic sale with a premium."
Tech companies may buck the trend, attracting demand from investors even if they are smaller in size, Goldman Sachs Chief Financial Officer Dennis Coleman said during the firm's financial conference in December.
The Wall Street investment banking giant has a "substantial tech pipeline" of IPOs and expects to see offerings for fast-growing companies to rebound after strong performances from recent small and mid-cap tech IPOs.
