JPMorgan Says IPO Market for PE-Backed Companies Is ‘Very’ Open

(Bloomberg) — The market for initial public offerings of companies that are owned by the likes of private equity firms is picking up, buoying the outlook for such first-time share sales heading into next year, says a top JPMorgan Chase & Co. banker.

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At least four such US listings are slated for this month, including StandardAero Inc. The aircraft maintenance services provider, backed by Carlyle Group Inc., raised $1.44 billion in an IPO Tuesday. The burst of business will be welcome news for investors sitting on $3.2 trillion of companies that have been stuck in private equity firms’ portfolios after a choppy three-year stretch for new entrants.

Keith Canton, JPMorgan’s head of Americas equity capital markets, said the market for sponsor-backed companies is “very much open” with firms seeking to lower debt loads or provide existing investors an opportunity to cash in.

“The deals pricing in the next 10-15 days are largely sponsor-backed assets,” he said in an interview Tuesday before StandardAero priced. “That gives us a higher degree of confidence for volumes next year just given the number of high-quality assets that sit within sponsor portfolios.”

Broadly speaking for the IPO market, the pace of debuts has remained strong, with year-to-date proceeds reaching $35.2 billion, up 61% from this point last year, data compiled by Bloomberg show.

Canton estimates a dozen companies could go public on US exchanges via IPO in the fourth quarter. However, while the IPO market is outpacing last year, annual proceeds will still likely be 20% to 25% below what the bank considers normal, he said.

StandardAero, which had JPMorgan and Morgan Stanley as its lead banks, priced an already-boosted IPO above a marketed range to make it one of the year’s largest deals. The shares rallied as much as 31% to $31.51, from its $24 IPO price.

Partners Group Holding AG-backed KinderCare Learning Cos. Inc. and Moove Lubricants Holdings, a unit of conglomerate Cosan SA which counts CVC Capital Partners Plc as an investor, will look to build momentum for initial offerings before US elections.

With the slate of 28 companies that went public over the past month up an average of 8% from their IPO price, and the majority of this year’s debutants trading higher, the performance sends a strong signal for investors and companies looking to come off the sidelines.

“IPOs are working,” Canton said. “Overall, the deals have been performing well, with the larger deals significantly outperforming from a returns standpoint. This presents a strong opportunity for the buyside to deploy capital.”

Busy Stretch

The calendar is shaping up to be busy ahead of the Nov. 5 US vote with a swath of companies lined up to tap investors in October. Sao Paulo-based Moove and KinderCare are on the road courting investors while Cerebras Systems Inc. and Platinum Equity-backed technology company Ingram Micro Holding Corp. filed publicly this week.

The roadshows and pending share sales come as broader equity benchmarks are trading near all-time highs and gauges of volatility are mostly in a range that has historically coincided with IPO activity. However, mounting geopolitical tensions and questions around the resilience of the US economy are complicating the decision for companies.

IPO candidates including Moove, a producer and distributor of lubricants and greases, and Ingram Micro are indicative of the breadth of prospects bankers have been talking up with investors.

“The recent IPOs and the ones that are getting ready to price span various sectors and serve different customers,” Canton said. “However, they share several key characteristics: They generate real revenue, are profitable or on the path to profitability and have durable business models.”