Cracking the code | Building winning deal stories - 2022 year end edition

Creating opportunities through insights into IPO readiness, SPAC valuations, and capital market trends.


Recession concerns drive investor hold-and-wait mindset for IPO assets

An anticipated recession has negatively impacted expectations. Economic uncertainty, lower valuations, and continued Fed rate hikes have convinced companies and private equity sponsors to hold off on exiting via IPO or raising capital. And they’ve convinced investors to shift away from high-growth IPO prospects towards businesses with strong fundamentals. These macro headwinds have been reinforced by heightened regulatory scrutiny and increased SPAC redemptions, leading to steep year-over-year drops in both traditional and SPAC IPOs.

Activity is likely to remain sluggish through H1’23. Private equity continues to exit via sales to corporate or other private equity. We expect more favorable conditions to propel IPO activity in H2’23, particularly considering a very healthy pipeline of IPO candidates.

Source: KPMG, see below


  • New SEC rules adopted in 2022 have brought SPAC disclosures, diligence, and liabilities closer to the process followed by traditional IPOs.
  • This expanded framework created headwinds for new SPAC formation just as market conditions became unfavorable.
  • The regulatory uncertainty, heavily publicized examples of a few bad apples and media negativity have bruised the SPAC market.
Source: KPMG, see below
The battle for IPO investors is won through a differentiated equity story, told in the language of financial and operational performance that support a competitive edge. Key insights lie within the KPIs and are echoed within the MD&A—helping market participants understand where and how company value is generated.
Shari Mager, Partner, U.S. National Leader, Capital Markets Readiness, KPMG US

Signals intelligence:

Reading the capital markets for IPO and SPAC timing

While every company’s mix of deal-valuation drivers is unique, some market indicators are broadly relevant. Below, a selection of market indicators, updated quarterly.



While every company’s mix of deal-valuation drivers is unique, overall deal activity—both volume and proceeds—tends to correlate inversely with volatility (VIX)

Volume vs Volatility

Quarterly IPO Volume (Traditional & SPAC) vs average VIX

As the average VIX jumped from 20.8 in 2021 to 25.9 in 2022, traditional IPO volume fell from 426 to 106 and gross proceeds fell from $153.8BN to $8.6BN—a dramatic YoY decline of 94.5%.

New SPAC IPOs fell from 611 in 2021 to 88 in 2022, a drop of 85.6%, while gross proceeds decreased by 91%. The outlook for 2023 remains uncertain amid the Fed’s commitment to high interest rates.

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  • Aside from anomaly's (recovery of COVID in 2021) and other macroeconomic conditions (i.e. interest hikes), SPACs and traditional IPOs have typically had a negative correlation with the volatility in the market (VIX) as whenever the volatility increased the volume of both SPACs and IPOs declined.
  • As the average volatility increased across 2022 in comparison to 2021, the volume of new SPAC IPOs and traditional IPOs also shrank significantly.


While public and private markets are historically correlated, private valuations have nearly always adjusted more slowly and modestly. Companies are waiting for better public valuation multiples, which may drive an adjustment in the public/private valuation gap that helps open an IPO window.
Nausheer Allibhoy, Managing Director, Tax Economic & Valuation Services, KPMG US



Annual PE and VC activity by volume and proceeds

After reaching record heights in 2021 fueled by a low-rate environment and pandemic tailwinds, PE/VC backed IPO activity sank dramatically in 2022.


US IPO Activity – Venture Capital

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  • The slowdown in IPOs overall directly impacted the number of venture capital backed IPOs, with only 14 backed IPOs that raised a combined $1.7 billion, a decrease of 92% and 98%, respectively, year over year
  • Venture-backed IPOs in 2022 averaged a 2% return from offer compared to those from 2021 which average a return of -58%

US IPO Activity – Private Equity

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  • For the first time in 20+ years, there were no IPOs backed by private equity in 2022
  • Leveraged buyouts are facing higher debt servicing costs coupled with lower valuations and volatility, making IPO exits less attractive




SEC continues to bring amendments to the rules specifically regarding projections, disclosures and underwriters, resulting in curbing the growth of SPAC IPOs and M&A

SEC Rules and Guidelines for SPACs

SEC proposed new rules regarding investor protections and disclosure requirements with respect to, compensation paid to sponsors, conflicts of interest, dilution, and the fairness of business combination transaction due to the abysmal performance of De-SPAC companies.






Proposed safe harbor for SPACs under the conditions that the SPAC's assets consist solely of certain types of securities and engage in only 1 De-SPAC transaction which it should complete with 24 months




Increased transparency in financial projections by eliminating the safe harbor provisions.






Alignment of De-SPAC transactions with traditional IPOs by requiring target companies as 'co-registrant' and requiring underwriters involved in SPAC IPOs to also underwrite respective De-SPAC transactions



Rule 140a treats the SPAC IPO and De-SPAC transaction as one continous distribution of securities which further would mean that anyone who has acted as an underwriter of a SPAC and directly/indirectly participates in a de-SPAC transaction to also be deemed as an underwriter in the de-SPAC transaction    



Enhancing disclosure requirements to include potential conflict of interest, dilution of shareholder, interest, compensation earned by sponsors etc.



Key comments from participants on SEC's new rules



Implied Probability of U.S. Recession

10y1y U.S. Treasury Spread

  • Rising interest rates - Higher interest rates will dampen housing demand and create new costs for borrowers. The Fed is expected to raise rates at just about every meeting (8x) this year.
  • Consumer price inflation in June 2022 9.1% - Inflation is eroding .consumer purchasing power and accelerating a tightening of monetary policy.
  • The contraction in first quarter GDP hid growth in consumer spending.
  • Risks of a recession over the last twelve months are rising, but not yet a level that indicates a recession is imminent.


Real GDP and Consumption Report

Quarterly growth, SAAR

Federal Reserve Rate Path

Percentage Point Change from First Rate Hike

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Companies should build resilience and adaptability to the new age of uncertainty. They should regularly review their business plan, financial model, and equity story. And they should focus on growth by identifying their value drivers.
Shari Mager, Partner, U.S. National Leader, Capital Markets Readiness, KPMG US


SPAC & IPO investors look at a handful of valuation drivers. Do you know yours?

In the competition for investors and capital, investment narratives matter. They cut through the deluge of data and analysis, and help companies sift real windows of opportunity from market noise. The most compelling deal stories come from insights about a company’s unique mix of valuation drivers. Sector. Markets. Customers. Portfolio mix. Capital structure.

We can help you understand and improve the factors that drive maximum deal value for your offering.


Meet the team to learn more

Shari Mager

Shari Mager

Partner, U.S. National Leader, Capital Markets Readiness, KPMG US

+1 408-367-7661
Nausheer Allibhoy

Nausheer Allibhoy

Managing Director, Tax Economic & Valuation Services, KPMG US

+1 818-477-4350

Source (for all market commentary and data cited on this page): KPMG, US Equity Capital Market Update, Q3’22, October 2022
Source for US IPO Activity - Private Enterprise View: Renaisssance capital