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Considering the market challenges of recent years, including stubborn inflation, geopolitical instability and rising interest rates, corporates have been actively exploring ways to unlock value and drive shareholder returns. Two of the larger US IPOs in Q2 2023 were carve-outs from corporates, and a number of similar spinoff transactions are in the pipeline.
The Market Outlook in 1H 2023
Despite the slowdown in the US IPO market in recent quarters, many of the headwinds that contributed to the dearth of activity began to subside in 1H 2023. Equities have rebounded from 2H 2022 lows, inflation may have peaked, interest rate increases could be nearing an end, and volatility has subsided to pre-COVID lows.
Still, it may take the IPO market longer to recover than many market participants forecasted at the beginning of the year. The unforeseen banking crisis in 1H 2023 drove uncertainty in the markets, but contagion fears seem to have faded, yielding optimism for more activity in the back half of 2023 and into 2024, given the more constructive market backdrop.
“Despite the continued slow pace of IPOs, recent improvements in market sentiment and the uptick in follow-on activity could be a harbinger of brighter days in the IPO market later this year or next year,” says Mark Schwartz, EY Americas IPO and SPAC Advisory Leader.