IPO Accounting & Legal Fees: 2014 Update

2014 saw mixed results in trends related to the accounting and legal fees of IPO companies. Average fees steadily increased from 2008 to 2013, with particularly steep inclines being noted in 2012 and 2013. In 2014, however, both average accounting and legal fees for IPO companies took a sharp decline. Of particular note is the 36% decrease in average legal fees from 2013 to 2014, which contrasts with the 38% increase in IPO proceeds over the last year.

As indicated in the table below, total accounting fees grew steadily from 2008 to 2014. Last year, total accounting fees for IPOs exceeded $300 million for the first time in the years under review. This amount is over 5 times the total amount from 2008, which is consistent with the 500% increase in the number of IPOs, from 61 to 303.

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Trends in average accounting fees, however, have been less consistent. Although average accounting fees grew 31% from 2008 to 2013, this growth has been up and down across the years. Much of the total increase in fees was lost in 2014, though, as average accounting fees fell back under $1 million – just 8% more than average fees in 2008. We’ll have to wait and see whether 2014 constitutes a blip or a new trend.

As mentioned in our post from last year, IPO Accounting and Legal Fees: 2013 Update, total legal fees rapidly increased to almost $448 million in 2013, an 80% increase from 2012. That surprising increase, however, appears to have been an outlier, as total legal fees fell by 17% in 2014 to $370 million.

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By and large, average legal fees steadily increased from 2008 to 2013, growing more than 45% over that time. But in 2014 average legal fees for IPO companies decreased by roughly 36% to $1.2 million, which is the lowest average legal fees among all the years under review.

Since 2008, the total dollars raised by IPO issuers has continued to grow, as indicated in the table below, along with an increase in the total number of IPOs. In 2014, IPO proceeds experienced a significant 38% increase to $89 billion, as compared to the $64 billion raised in 2013. This, of course, is due largely to the record-breaking Alibaba offering, which raised $25 billion.

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Finally, total fees as a percentage of total IPO proceeds experienced a steady increase from 2008 to 2013, peaking to over 1% in 2013. However, in 2014 this ratio fell to 0.75%, returning to a level similar to prior years.

Overall, 2014 presented some interesting new findings in the accounting and legal fees disclosures of IPO companies. By some metrics, such as total accounting fees and total IPO proceeds raised, 2014 was an historic year. But by other metrics, this past year represented something of a reversion to the norm compared to 2013.

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