TPG Capital and Warburg Pincus LLC, the private equity firms that acquired Neiman Marcus Inc. for about $5 billion, now are planning to raise as much as $100 million from an IPO of the luxury retailer. The deal won’t happen overnight, and it’s still possible that the buyout giants will find some other kind of exit strategy – the buzz is that they briefly pondered a deal involving Saks (NYSE: SKS). The fact remains, though, that in spite of the recent market turmoil, this may turn out to be a great year for IPOs. Or at least a great year for the bankers that underwrite these offerings, based on recent data from Dealogic.
So far this year, Dealogic reported last Friday, IPO volume worldwide hit $61.7 billion, up from $58 billion in the year-earlier period. The number of deals is down, but the average size – even without Facebook (NASDAQ: FB) – is up, hitting $196 million, the highest average deal size recorded. Real estate IPOs have been a big driver, Dealogic reports, with IPOs generating fees of $377 million, compared to a mere $115 million in the first half of 2012.
Another interesting tidbit: Without the impact of deals in the Americas (and particularly the United States), the investment banking industry might be suffering a great deal of pain. Together, the Americas generated 60 percent of IPO revenue, and it is the only region that has seen an increase in investment banking fees overall.
Anyone hoping that a surge in IPOs and deal activity would result in the wealth being spread more evenly across a greater number of banks is likely to be disappointed, however. The ten largest financial institutions claimed the largest share of fees that they have earned since before the worst of the financial crisis hit in early 2008, earning 56 cents out of every dollar paid by clients, compared to 49 cents in the year-earlier period.
That may not completely offset the impact of low interest rates and a flagging mortgage-refinancing business for some of the biggest banks, but it’s good news for more deal-oriented investment banks.