PIPE Transaction Trends: 2017 & 2018 Growth in Alternative Offerings

Private Investment in Public Equity (PIPE) transactions offer company issuers the opportunity to sell unregistered equity via a private marketing process. PIPEs include both individual and institutional-grade investment groups. In recent years, smaller firms are utilizing PIPE transactions for acquisition financing, growth capital and a host of additional financing needs. Private equity investors have numerous opportunities to invest in companies through PIPE transactions. The article will present an overview of PIPE transactions, including the recent deals that occurred in 2017. A synopsis of the trends and outlook of PIPE transactions in the private equity market will also be presented.


Reverse mergers, often referred to as alternative public offerings (APOs), are typically connected to PIPE transactions. The public offerings via reverse mergers combined with PIPEs have become more popular as investors engage in PIPE transactions to gain more liquidity in what is often an illiquid public microcap market. Following a reverse merger transaction, companies generally complete a capital-raising transaction via a PIPE. The reverse merger is often used as a means to expose the company to the public to attract PIPE investors. PIPEs have also gained popularity due to numerous benefits to companies. For example, PIPE transactions can be executed in less than a month or few weeks, and there is also more flexibility in PIPE transactions compared to other financing alternatives.[1]


Although, high valuations in deals impacted the number of mega deals in the private equity market in 2017, overall private equity fundraising still increased in 2017 as investors increased their allocations into private deals.[2] In 2017, PIPE and private placement markets had a total of 882 transactions at a value of $30.2 billion. However, PIPE offerings alone raised more than $76 billion. There is a total of fourteen transactions with a value of $101.1 million that had not yet closed as of January 16, 2018.[3] During Q3 2017, PIPE offerings raised more than $16 billion compared to $17.46 billion in Q2 2017. Most of the deals were associated with an increase in biotech and technology offerings. Overall, biotech and technology companies increased their research and development in 2017. For example, during Q3 2017, the technology sector had 30 deals and raised approximately $400 million. [4]

The maritime shipping industry also generated large PIPE transactions. Teekay Offshore Partners LP (TOO), for instance, raised over $640 million. In addition, the healthcare industry executed over 130 PIPE transactions, the largest volume of deals for across industries—due in part to the increase in medical research in 2017. Although, the energy industry generated some of the biggest offerings, healthcare PIPEs yielded the highest number of total transactions. An increase in cancer research influenced early stage medical and biotech companies to raise more than a $1 billion in PIPE offerings. The energy industry also had high volumes of PIPE offerings due to recent hurricanes that required energy investments to replace infrastructure.[5] More than 100 deals emerged from companies with a market cap less than $50 million, while twelve of the companies had a market cap of more than $5 billion.4

Q4 2017 saw the most active PIPE transactions in the equity market with more than $19 billion in closed PIPE offerings. The increase in PIPE offerings was attributed to an increase in individual placements.


The growth in the global market and the expansion in the economy have impacted valuations. Valuations continue to grow with the growth in the equity market as private equity partners compete for the same transactions. Light covenants and low interest rates continue to drive debt multiples. Although, debt multiples are high, restrictions on interest deductibility could potentially reduce debt multiples in 2018. Private equity firms may also provide equity strategies to institutional investors in an attempt to reduce volatility on equity investments. The trend in portfolio allocation for institutional investors is expected to continue in 2018.

An interesting trend occurring in the private equity market is structuring Indian PIPE deals. India’s strong economy as well as its high gross domestic product (GDP) rate of 8.5% have attracted private equity investors.[6] For example, the private equity sector in India experienced a record high in 2017 with $24.4 billion as private equity investments increased and private sector lenders gained more opportunities in the market. PIPE deals also accounted for 12% of the total investment activity and a majority of the investment activity was associated with the financial services sector. The top PIPE deals in India in 2017 included a $1.1 billion investment in Axis Bank Ltd by Bain Capital, a $338 million investment by Caisse de Depot Quebec (CDPQ) and Canadian Pension Plan Investment Board’s (CPPIB) and CDC Group’s $260 million investment.[7] The increase in private equity investments lured more PIPE investments in India.


Although, valuations remain high in the private equity market, performance outlook for PIPE transactions in 2018 is expected to remain strong if 2017 bull market conditions persist.. The demand for increased investments in PIPE transactions is likely to have a positive influence on the overall deal environment in 2018[8]


Small cap firms utilize PIPE transactions to raise capital and finance growth. Reverse merger transactions are currently being combined with PIPE transactions to expose the company to the public markets and attract greater investors to raise capital. Q4 2017 was the most active period for PIPE transaction executions with the energy industry generating the highest volume of PIPE transactions. Despite high valuations and high debt multiples, equity investments continue to increase. In 2018, the outlook for PIPE transactions remains strong.


[1] Legal and Compliance, LLC, PIPE Transactions, (2018), http://www.legalandcompliance.com/securities-law/pipe-transactions/.

[2] PWC, Private Equity Deals Insights: Year-End 2017, (2018), https://www.pwc.com/us/en/industries/private-equity/library/quarterly-deals-insights.html.

[3] PR Newswire, PlacementTracker Publishes 2017 PIPE and Private Placement Markets League Tables, (Jan 17, 2018), https://www.prnewswire.com/news-releases/placementtracker-publishes-2017-pipe-and-private-placement-markets-league-tables-300583577.html.

[4] Paul Springer, PIPE Market Raises Over $16 Billion Dollars in Third Quarter, (October 2, 2017), http://www.thedeal.com/the-deal-pipe-league-table-2017-q3/.

[5] The Street, Third Quarter PIPE Market Raises Nearly $20 Billion in Deals; Low Technical Volatility but Political Uncertainty Looms, (Oct 2, 2017), http://pressroom.thestreet.com/releasedetail.cfm?ReleaseID=1042352.

[6] CA. Binoy Joy, Private Investments in Public Equity (PIPE) – Opportunities and Challenges in India, International Journal of Engineering Technology Science and Research, 1167-1177, (2017), http://www.ijetsr.com/images/short_pdf/1506087597_1167-1177-ieteb223_ijetsr.pdf.

[7] Sneh Susmit, Private equity sector sees record $24.4 billion inflow in 2017, www.livemint.com/Companies/BfqbFlxsx2z2bEcQQBXrvL/Private-equity-sector-sees-record-244-billion-inflow-in-20.html.

[8] Dr. Nils Rode, Outlook 2018: Private equity, (Aug 12, 2017), http://www.schroders.com/en/us/tp-us/markets/outlook-2018-private-equity/.

Carl Christensen
Carl Christensen is a Principal with Deal Capital Partners, LLC and InvestmentBank.com. Before joining InvestmentBank.com Carl served as CFO for a $50M consumer events company. He is a former employee of both Goldman Sachs and Deloitte. He brings both breadth and depth to the M&A advisory team here at InvestmentBank.com.
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