IPOs: Betting on Big Brands

After nearly shutting down earlier this year, the IPO market has come to life. Following Hyatt and Dole Food, the latest big name to consider an offering is Dollar General

By Ben Steverman

The initial-public-offering market is suddenly crowded with some very high-profile players.

Among the private companies looking to go public are Hyatt Hotels, which said it was considering an $1.15 billion IPO on Aug. 5, and Dole Food, which filed notice on Aug. 14 for a $500 million offering.

The name behind another iconic U.S. brand—poultry processor Swift & Co.—is also throwing its hat in the IPO ring. JBS USA Holdings, a unit of Brazil-based JBS filed for a $2 billion IPO on July 22. Even as a standalone company, JBS USA would be the world's largest beef producer, with $15.4 billion in sales last year.

Dollar General's Declaration

The latest notable IPO candidate is Dollar General, which officially declared Aug. 20 that it may raise $750 million from a stock market offering. With 8,577 stores in the U.S., the discount retailer claims to be "the nation's largest small-box discount retailer."

All the IPO activity this summer is quite a contrast from the previous nine months. In the past three quarters, according to Hoovers, IPO filings were made by only 13 companies with a combined value of less than $3 billion. However, in less than two months since the start of the third quarter in July, 21 firms valued at nearly $10 billion have filed.

Not all companies that file for IPOs actually go through with stock offerings. In fact, the brutal stock market in late 2008 and early 2009 unexpectedly derailed many an IPO.

Big Climate Change

The uptick in IPOs has coincided with a rebound in equity markets. "There were no calls for months and months," says Scott Gehsmann, a partner at PricewaterhouseCoopers, who helps companies prepare for IPO filings. Since May and June, "it's picked up immensely—and continues to pick up."

Because filings can take three months or more to prepare, you can expect even more IPOs being floated soon. "Three to six months from now you're going to see immense growth," Gehsmann says.

The Dollar General offering in particular demonstrates how much the environment for IPOs has changed in recent months. Of the few firms that have successfully gone public in the past year, there have been "common threads," says Scott Sweet, senior managing partner of IPO Boutique . In a tough economy, those firms have shown strong revenue and profit growth. And, during a credit crisis, those companies could tout very low debt loads.

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