The coronavirus crisis has created human tragedy at an unprecedented scale, infected millions, wreaked havoc on multiple segments of the economy, and cast a glaring spotlight on the weaknesses inherent in business models and systems across sectors worldwide.

But in the throes of any crisis lie the seeds of opportunity. Even amid the intense pressures brought to bear by the far-reaching ripple effects of stay-at-home orders and other emergency measures, some companies are standing out for their resilience. Whether their response to disruption of their operations and strategies was swift and effective or their core business lines proved particularly well-suited, if not critical, in the time of COVID-19, some companies have led by example.

Deloitte collaborated with PitchBook to examine data sets surrounding expansion-stage companies that were embarking on the pathway toward an initial public offering (IPO) before the crisis emerged.

Key findings of the Deloitte/PitchBook report include:

• The expansion-stage ecosystem proved a fertile source of IPOs throughout the 2010s as their scale precluded pure M&A. However, the rates at which companies in this stage went public remained highly variable due to accessibility of private capital.

• IPOs of expansion-stage companies overall trended larger over time, as many companies have opted to stay private longer than historically expected.

• The IPO environment in 2020 is complex and fraught with uncertainty but not as doom-laden as headlines may suggest. A few companies are ready to test the waters, blank-check companies are filing, and biotech companies are still pursuing and closing on IPOs.

• Expansion-stage companies that were to some degree underway with IPO preparations are opting to continue, realigning as need be in response to stresses exerted by the COVID-19 pandemic; several of those at very early stages have postponed.

• Multiple tactics exist for expansion-stage companies to respond to any pressures or seize any opportunities driven by the crisis; timing is imperative for executives as they seek to assess the permanency of the changes wrought by COVID-19.

• The crisis ultimately is a tragedy that will prove a test of resiliency on the part of executives and expansion stage companies, but as in any crisis, opportunities are emerging for businesses to find a firmer financial footing and become prepared for what lies ahead.

“Companies that have already proven they are first in class or winners of their segment will still be able to conduct fundraises,” notes Heather Gates, Audit & Assurance Private Growth Leader, Deloitte & Touche LLP . “Especially as more nontraditional investors such as growth equity firms are involved in this segment, there could still be plenty of investment funds available.”

 

The Deloitte/PitchBook report was originally published in May 2020. To read the full report, CLICK HERE