Amid IPO Wave, Firms Ride Rising Fee Tide

Amid IPO Wave, Firms Ride Rising Fee Tide

Monday kicked off a slow week for initial public offerings in the U.S., with only four new listings slated to hit the market. Nonetheless, this month will be the most active April for new filings in more than a decade, according to data analyzed by Renaissance Capital.

As previously noted by The Am Law Daily, the market for U.S. IPOs has been hot in recent weeks, with a trio of Am Law 100 firms grabbing roles earlier this month on the nearly $2.4 billion IPO by Ally Financial, the largest float in the country this year. Ally’s IPO yielded $4.6 million in legal fees for lawyers from Cahill Gordon & Reindel, Davis Polk & Wardwell and Sullivan & Cromwell advising the former General Motors finance arm and its underwriters on the listing.

Securities filings show that another IPO—the $650 million listing by La Quinta Holdings, a hotel chain owned by private equity giant The Blackstone Group—generated $5.73 million in fees for Simpson Thacher & Bartlett and Latham & Watkins.

Although the market for new U.S. IPOs has begun to cool—boutique investment bank Moelis & Company slashed the size of its IPO last week to nearly $163 million—the fees earned by lawyers advising on various IPOs are higher than ever.

Audit Analytics, a Sutton, Mass.–based independent research provider and business intelligence firm owned by the privately held Ives Group, issued an update last month to an analysis it first released last year examining IPO issuer accounting and legal fee trends for IPOs between 2008 and 2012. During that five-year time frame, legal fees for new listings steadily increased, according to Audit Analytics, which noted last month that the trend continued in 2013.

John Pakaluk, an accountant and product manager with Audit Analytics, told The Am Law Daily in an email that the study itself did not investigate or come to any conclusions about what might be causing the trend toward rising fees. But he did have some ideas.

“The increase appears to be driven mainly by an increase in large company IPOs, which would reasonably be more expensive in terms of fees,” Pakaluk says. The thaw of U.S. capital markets that were effectively frozen in the aftermath of the 2008 global financial crisis has restored the pipeline of U.S. IPOs, and Pakaluk notes that new federal legislation could actually help bring back down the cost of new listings.

The passage of the Jumpstart Our Business Startups Act in 2012 was designed to make it easier to invest in emerging growth companies (EGCs) that might one day tap into the public markets. Pakaluk, citing an analysis by Audit Analytics last fall, says there’s evidence that the JOBS Act is helping to keep down legal costs for EGC IPOs.

House Democrats and Republicans are currently quarreling over several JOBS Act amendments to further reduce state and federal regulatory costs for new IPOs, according to The Deal. And a recent analysis by Gunderson Dettmer Stough Villeneuve Franklin & Hachigian—a firm with Silicon Valley bona fides that rode the dot-com IPO bubble over a decade ago—notes that last year most venture capital–backed IPOs took advantage of provisions in the JOBS Act to register confidentially.

Latham, which recently released its second annual report on the impact of the JOBS Act, is one of several Am Law 100 firms reaping the benefits from its work on the latest pipeline of U.S. IPOs. So far this year, no IPO has yet to match the $33 million in legal fees generated by the Empire State Building’s $930 million IPO last year, according to our previous reports.

Below are some of the largest U.S. IPOs over the past month, the size of the listing and how much they generated in legal fees, followed by the names of the law firms that advised on the offering:

IMS Health Holdings ($1.3 billion IPO, $1.8 million fees): Ropes & Gray for company, Cleary Gottlieb Steen & Hamilton for underwriters. IMS’ general counsel is Harvey Ashman.

Enable Midstream Partners LP ($500 million IPO, $2 million fees): Baker Botts for company, Latham for underwriters. Mark Schroeder serves as EMP’s general counsel.

Weibo ($286 million IPO, $2 million fees): Skadden, Arps, Slate, Meagher & Flom, offshore firm Maples and Calder and China’s TransAsia Lawyers for company; Shearman & Sterling, Maples and Calder and China’s Haiwen & Partners for underwriters.

GrubHub ($193 million IPO, $1.2 million fees): Kirkland & Ellis for company; Skadden for underwriters. GrubHub’s general counsel is Margo Drucker.

Phibro Animal Health ($176.5 million IPO, $1.1 million fees): Kirkland for company, Sullivan & Cromwell for underwriters.

Moelis & Company ($162.5 million IPO, $5.5 million fees): Skadden for company, Sullivan & Cromwell for underwriters. Moelis & Co.’s general counsel is Osamu Watanabe.

Opus Bank ($154 million IPO, $2.6 million in total advisory fees): Patton Boggs for bank; Simpson for underwriters. As of March 31, Patton Boggs attorneys owned approximately 23,641 shares of common stock in Opus Bank, whose general counsel is Donald Royer.

iKang Healthcare Group ($153 million IPO, $1.2 million fees): Davis Polk, offshore firm Conyers Dill & Pearman and China’s King & Wood Mallesons for company; Simpson and China’s Fangda Partners for underwriters.

Tarena International ($137.5 million IPO, $1.3 million fees): Skadden, Conyers Dill and China’s Han Kun Law Offices for company; O’Melveny & Myers and Haiwen & Partners for underwriters.

Sportsman’s Warehouse ($119 million IPO, $1.6 million fees): O’Melveny for company; Latham for underwriters.

Opower ($116 million IPO, $1.2 million fees): Goodwin Procter for company; Wilson Sonsini Goodrich & Rosati for underwriters. Opower’s general counsel is Michael Sachse.

The Rubicon Project ($102 million IPO, $2.15 million fees): Gibson, Dunn & Crutcher for the company; Wilson Sonsini for underwriters. The Rubicon Project’s general counsel is Brian Copple.

Leju Holdings ($100 million IPO, $2.24 million fees): Skadden, Maples and Calder and Fangda Partners for company; O’Melveny and Haiwen & Partners for underwriters.

Paycom Software ($99.7 million IPO, $2.05 million fees): Haynes and Boone for company; Kirkland for selling stockholders; and Gibson Dunn for underwriters.

Zoe’s Kitchen ($87 million IPO, $1.2 million fees): Kirkland for company; Latham for underwriters.

TriVascular Technologies ($78 million IPO, $950,000 fees): Arnold & Porter for company; Cooley for underwriters. TriVascular’s general counsel is Kimberley Elting. Arnold & Porter attorneys own less than 1 percent of TriVascular’s common stock.

City Office REIT ($72.5 million IPO, $1.71 million fees): Shearman and Ballard Spahr for the real estate investment trust; Hunton & Williams for underwriters.

Five9 ($70 million IPO, $1.3 million fees): Jones Day for company; Goodwin Procter for underwriters.

Cerulean Pharma ($60 million, $1.34 million): Wilmer Cutler Pickering Hale and Dorr for company; Ropes & Gray for underwriters.

Scynexis ($55 million, $1.1 million): Cooley for company; DLA Piper for underwriters. Eileen Pruette serves as general counsel for Scynexis.

Vital Therapies ($54 million, $3.39 million): Wilson Sonsini for company; Cooley for underwriters.
Farmland Partners ($53 million, $800,000): Morrison & Foerster for the REIT; Hunton & Williams for underwriters.
Corium International ($52 million, $1.2 million): Fenwick & West for company; Latham for underwriters.
Quotient ($50 million, $1.25 million): Clifford Chance for company; Gibson Dunn for underwriters.
Viggle ($50 million, $375,000): Greenberg Traurig for company; Graubard Miller for underwriters. Viggle’s general counsel is Mitchell Nelson.
Adamas Pharmaceuticals ($48 million, $1.5 million): Cooley for company; Davis Polk for underwriters.
Aldeyra Therapuetics ($25 million, $425,000): Gunderson Dettmer for company; Mintz, Levin, Cohn, Ferris, Glovsky and Popeo for underwriters.
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