MS Morgan Stanley

By Jack Nicas 

LAGUNA BEACH, Calif. -- One of the tech industry's most prominent bankers predicted that the number of tech IPOs next year will soar, easing pent-up demand among investors.

Michael Grimes, managing director and co-head of global technology investment banking at Morgan Stanley, said he expects 30 to 40 tech initial public offerings in 2017, compared with 14 so far this year. That increase would return the IPO rate to around previous levels, reversing this year's slowdown.

"They're coming," Mr. Grimes said, speaking at the WSJDLive conference.

Amid the dearth of IPOs, mergers and acquisitions have been returning the majority of cash to tech investors, Mr. Grimes said. Since the start of 2015, tech acquisitions have returned roughly $200 billion to investors, compared with about $25 billion from tech IPOs.

Such an active M&A market "is creating excess demand for IPOs," Mr. Grimes said -- one reason he predicted next year's tech-IPO market would be "booming."

Fueling the increase in M&A has been a surge of interest in tech companies from three new groups of buyers: nontech firms; private-equity firms; and foreign buyers. Mr. Grimes said spending by Chinese buyers has increased to $42 billion from $300 million in 2012, while nontech firms' spending on tech companies has surged 263% since 2012.

Monsanto Co., General Motors Co., Wal-Mart Stores Inc. and Unilever PLC have all paid for tech firms recently. Such companies were previously reluctant to spend on tech M&A but "now they have no choice. They see the imperative," he said. For investment bankers like him, "this is good news."

Write to Jack Nicas at jack.nicas@wsj.com

(END) Dow Jones Newswires

October 26, 2016 13:45 ET (17:45 GMT)

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