The strong rally in the US stock market has sparked a resurgence in IPOs, bringing new hope to private equity investments

Private equity-backed initial public offerings (IPOs) in the U.S. are expected to make a comeback.

According to a new analysis by data provider PitchBook, last year, the exit amount for companies backed by acquisition firms in the U.S. was only $8.7 billion, far below the pre-pandemic average of $45.1 billion. Factors affecting the entire IPO market—high interest rates, macroeconomic uncertainty, and rising geopolitical risks—have created a challenging environment for private equity-backed companies.

However, with the U.S. stock market reaching historic highs and improvements in the macroeconomic environment, the exit outlook has become more promising. PitchBook has listed 50 private equity-backed companies preparing for IPOs on U.S. exchanges next year, with selected companies being large enough for the public market, having recently filed for IPOs or engaged in preparatory activities, and having been on the books of acquisition firms for a long time.

Tim Clarke, PitchBook's chief private equity analyst, stated, "The stock prices being at historical highs create a halo effect, and we fully expect 2025 to be another year of recovery."

In fact, the recovery has already begun. PitchBook's data shows that this year, there have been $30.5 billion in private equity-backed IPO exits, raising $6 billion. In the third quarter alone, five companies exited through IPOs, including Ingram Micro (INGM.US) backed by Platinum Equity and KinderCare Learning Companies (KLC.US) backed by Partners Group.

PitchBook's analysis of private equity-backed companies that may apply for IPOs next year includes several factors. One key factor indicating IPO potential is the length of time the company has been owned by acquisition firms. Generally, private equity firms hold a company for five to seven years. The best timing for an IPO is usually between the third and fifth year.

Notably, among the companies listed by PitchBook, 19 have publicly filed for IPOs in recent years. This includes UST backed by Temasek Holdings Pte and Panera Bread Co. backed by JAB Holding Co.

Other factors include a large employee base and attractive growth signs. Clarke noted that unlike in 2021, when many small and troubled companies went public, the scale and quality are important this time.

He stated, "You need to have sufficient trading volume, positive cash flow, and a good revenue and profit growth trajectory." He added that his team is looking for larger companies and considers employee growth as one of the metrics In terms of employee growth, some of the largest companies that may apply for an IPO next year include Inspire Brands Inc., supported by Roark Capital Group, and Allied Universal Security Services LLC, supported by Caisse de dépôt et placement du Québec.

Compilation data shows that U.S. companies have raised $40.6 billion so far this year, surpassing $25.4 billion during the same period last year.

David DiPietro, head of private equity at T. Rowe Price, stated, "After a long period without companies seeking to go public, it really feels like the supply has finally emerged. There has certainly been an increase in activity around testing the waters meetings in recent weeks, which is a significant shift compared to a few months ago."