This Article explores current trends in structuring corporate governance and liquidity rights for private equity sponsor backed initial public offerings.

Rising stock prices and reduced volatility sparked a rebound in the initial public offering (IPO) market in the second half of 2009 and early 2010. Having shut down completely in early August 2008, the IPO market re-opened cautiously in the spring of 2009, gaining momentum over the remainder of the year. By year end, 48 offerings by US registrants had closed, with an average of eight deals per month from September to December of 2009. In the first quarter of 2010, 18 IPOs of US registrants closed and many more deals entered registration. With volatility returning to the market in the second quarter, the pace of new issues slowed, but issuers remain keen to access the market when conditions permit.

Private equity sponsor-controlled companies accounted for almost 40% of US company IPOs in 2009 and a comparable percentage in 2010. With M&A activity still relatively subdued, the public market offers a critical path to liquidity for the sponsor, as well as a source of capital to highly leveraged portfolio companies that need to repair overstressed balance sheets. In addition, the expectation of tax legislation targeting "carried interest" has brought increased urgency to private equity sponsors' quest for liquidity.

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