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With Europe's IPO market in the doldrums, lawyers in Silicon Valley are reaping the benefits.
A growing number of European tech companies are hiring Silicon Valley lawyers to take their companies public in the U.S., where the markets are more receptive to tech offerings, lawyers say.
It's not quite a flood of IPO work from across the pond, but they're working on a steady stream of deals, although most European companies won't be ready to go public here until next year.
"It clearly is a more discernible trend than we've seen in the past," said Jeffrey Saper, vice chairman of Wilson Sonsini Goodrich & Rosati. "It doesn't take a rocket scientist to realize that the U.S. markets have been very favorable to tech IPOs. And they're fun deals to do, although the travel can kill you."
Saper, an emerging companies partner who has worked on more than 200 public offerings, said his team is working on at least three IPOs for European companies. It's representing the company in two of those deals and the underwriters in one.
Branding is one factor driving the trend, Saper said. Many European tech companies just want to be associated with hot U.S. tech companies going public, such as LinkedIn Corp. and soon, Facebook Inc.
But the strength of the U.S. IPO market is perhaps the biggest reason. The freeze in Europe's capital markets that came in the wake of the euro zone debt crisis may be slowly thawing. But in the first quarter of this year, only two venture-backed European companies have gone public: Netherlands-based cable company Ziggo and Swiss-based Asian outsourcing specialist SKSH.
Meanwhile in the U.S., 20 venture-backed companies went public through the end of March, making it the most active quarter for IPOs since 2007, according to a recent report from Dow Jones VentureSource. Currently, 50 U.S. venture-backed companies have registered for an IPO.
Last year, of the 14 European venture-backed companies that went public, three tech companies chose U.S. stock exchanges: InterXion Holding NV, which provides carrier-neutral colocation data center services; Sequans Communications SA, which develops 4G chips; and Yandex NV, which provides search engine and Internet portal services. None went public in Asia.
"It is in a company's best interest to go public where they see potential for the greatest value," said Valerie Foo, senior research manager for Dow Jones VentureSource. "Unfortunately, the European stock markets have continued to see signs of meager activity, and that has probably pushed many to seek other options overseas."
This year, more European companies will do the same, many ushered through the IPO process by lawyers in Silicon Valley.
Patrick Pohlen, co-chair of Latham & Watkins' emerging company practice in Menlo Park, Calif., said he's working on four public offerings for European tech companies, from social media companies to semiconductor manufacturers. Cooley's Eric Jensen in Palo Alto said he's working on two offerings for tech companies.
"There's definitely more activity from Europe to the U.S. around the IPO sector," Pohlen said. "They're tech companies, and they want a Silicon Valley lawyer who knows IPOs."
While lawyers declined to name their European clients, they said some have offices in the U.S., but some don't. Regardless, European companies that are big enough to go public are either already doing business here, or getting ready to, Jensen said. Courting U.S. investors just makes sense.
"They can't ignore the U.S.," Jensen said.
The companies find their Silicon Valley lawyers through a variety of channels. They get connected through venture capitalists or company executives who had worked previously with the firms, Jensen and Saper said. There were beauty contests. And Pohlen said he's even received a few cold calls.
"But I don't see any more or less competition for deals than for a U.S. company looking to do the same thing," Pohlen said.
The work is steady, but most European companies won't be ready to go public in the U.S. until next year, lawyers said. The deals often take longer to put together on the front end because they're often more complicated, with lots of factors to consider.
Companies have to decide if they want to register with the Securities and Exchange Commission as a foreign private issuer, which means they can go public under international accounting standards and don't have to file quarterly financial reports. Or they can opt to be treated like a U.S. company.
Some might want to set up a holding company in Bermuda or others a parent company in Delaware. Some may want to restructure their organizations so they look more like U.S. companies to investors.
"I'm guardedly optimistic the trend will continue," Saper said. "But until we see a broader statistical sampling, it's hard to draw any conclusions."
