The global equity capital markets are poised for a resurgence in dealmaking activity in 2025, driven by a robust pipeline of high-profile initial public offerings (IPOs). Several prominent companies, including liquefied natural gas producer Venture Global, medical supply giant Medline, and cybersecurity firm Sailpoint, are expected to lead a wave of stock market flotations in the first half of the year, according to inside sources.
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This anticipated increase in capital markets activity reflects growing economic confidence, presenting a significant opportunity for private equity-backed companies. The past two years have been challenging for these firms, as high interest rates and volatile stock markets dampened dealmaking and hindered their ability to sell or list portfolio companies.
Private Equity Firms Positioned for Exits
“Many companies owned by private equity firms have grown substantially,” notes Arnaud Blanchard, global co-head of equity capital markets for Morgan Stanley. “Sponsors understand that a full exit may take time, prompting them to become proactive early in the cycle.”
Other notable companies potentially going public in the U.S. this year include Swedish payments firm Klarna, AI cloud platform CoreWeave, and financial technology company Chime, which confidentially filed IPO paperwork in December. Leading private equity firms have expressed increasing optimism about IPOs for their portfolio companies in recent months. As major U.S. banks prepare to report earnings, investor attention will be focused on the outlook for capital markets, which experienced a surge in activity last year.
Global Equity Issuance on the Rise
Global equity issuance increased by 20% in the previous year. However, IPO activity has lagged behind this broader growth, remaining significantly below the peak levels of 2021. According to Dealogic, IPOs raised $123 billion last year, a stark contrast to the record-breaking $594 billion raised in 2021.
Currently, the Cboe Volatility Index, a key indicator of investor sentiment, hovers around a relatively low level of 18, suggesting a potential near-term upswing in capital markets activity.
Anticipating Larger and More Diverse IPOs
Bankers anticipate a shift towards larger IPOs, typically defined as share sales exceeding $750 million. These larger offerings often involve established companies with robust financial performance and provide greater liquidity for investors. “IPOs are likely to be larger in size, on average, than ever before,” Brian Friedman, president of Jefferies, stated in a recent interview.
The expected 2025 IPO surge is also projected to span a wide range of sectors. “Investors continue to favor scaled, profitable companies with sound balance sheets and sustainable cash flows, particularly with the prospect of interest rates remaining higher for longer,” explains Matt Warren, Bank of America’s head of Americas equity capital markets cash origination.
Valuation Challenges and Alternative Exit Strategies
Despite rising valuations, many private equity-backed startups are still underperforming their target returns, according to JPMorgan Chase president Daniel Pinto. “Even with current valuations, many companies in sponsor portfolios are unable to generate a sufficient exit for these investments,” he observed. “Private equity firms can unlock value through various strategies, including partial stake sales in IPOs, which can then pave the way for a strategic sale at a premium.”
However, tech companies may defy this trend, attracting investor demand even with smaller IPOs, as suggested by Goldman Sachs Chief Financial Officer Dennis Coleman. He highlighted the firm’s “substantial tech pipeline” of IPOs and anticipates a rebound in offerings for high-growth companies following strong performances from recent small and mid-cap tech IPOs. This renewed optimism in the equity capital markets suggests a promising year for both companies seeking to go public and investors seeking new opportunities.
