Companies Should Consider Using Dual Track M&A and IPO Processes Given the Strength of the Equity Markets

Actionable Ideas for Companies and Sponsors

July 1, 2020

Companies Should Consider Using Dual Track M&A and IPO Processes Given the Strength of the Equity Markets

The recent recovery in leveraged finance has sparked renewed interest in launching sell-side processes for financial sponsor-owned companies, and evidence suggests both corporate and sponsor acquirors are reengaging in M&A activity.  In addition, IPO activity is proceeding at a record pace, with 40 IPOs priced (excluding SPAC IPOs) since March 1, 2020, most with strong aftermarket performance. In addition, with the S&P up 35% from its lows on March 23, public market valuations now provide a relevant exit valuation benchmark for sellers. Therefore, we believe that companies with attractive growth dynamics should seriously consider pursuing dual track processes to create optionality and maximize valuation.  A robust IPO alternative can provide both a very realistic exit as well as strong competitive tension for the M&A process. And with careful coordination between M&A and ECM professionals, clients can benefit from the best available exit alternative with little incremental management burden.