Leveraged IPOs: The Deluge

Overall, it's been a big year for IPOs, with the 206 deals that have come to market raising $40 billion, according to Dealogic. The dollar value of those IPOs already has eclipsed last year's tally and is threatening the $52 billion raised by U.S. companies in 2004.

But the bigger story is the surge in the number of private-equity-backed IPOs the past two years. This year buyout-sponsored IPOs account for 42% of the total dollars raised in the market for new stock offerings. That's a down bit from last year, when such deals accounted for 49% of the IPO market. Yet both years are up sharply from 2004, when stock offerings backed by private-equity firms represented 31% of the market's take.

There's no denying that private-equity-backed buyouts are on a tear. To date, the dollar value of leveraged buyouts now accounts for a whopping 26% of all U.S. mergers this year, according to Dealogic. In all, buyout firms have paid $340 billion to take out U.S. companies. Last year at this time, private-equity firms had spent $149 billion on LBOs.

In the past, private-equity firms typically held onto an investment for several years trying to make the business more efficient before looking to cash out. But now private-equity firms are paying themselves hefty dividends and looking to cash out just months after taking over a company.

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