LONDON, 27-3-2015 — /EuropaWire/ — Global IPO activity got off to a slow start this year compared with 2014 with 252 IPOs raising US$38.2b in the first quarter, a 4% decrease in volume and 19% drop in proceeds compared to the same period in 2014, according to the quarterly EY Global IPO Trends: 2015 Q1. Compared with the final quarter of 2014, activity was also down 31% by number of deals and 47% by capital raised.
- US sees first quarter lull in deals, but strong pick up is expected in Q2
- Europe leads the way by capital raised, accounting for five of the top ten deals globally
- Valuations are robust, with many market indices at highest levels since 2007
Maria Pinelli, Global Vice Chair, Strategic Growth Markets at EY said:
“After a strong finish to 2014, a dip in the overall level of IPO activity was anticipated. However, a notable feature of the first quarter was the slower pace of IPOs in the US, which was out-performed by both Asia-Pacific and EMEIA in terms of deal numbers and capital raised. Despite this slow start, we are encouraged that valuations have been robust and market fundamentals solid, with most indices coming close to or exceeding levels not seen since 2007. Furthermore, the healthy global IPO pipeline means we expect activity to pick up strongly as the year progresses.”
One indication of a healthy IPO market is the breadth of sectors represented by those companies coming to market. At a global level, industrials lead by proceeds, accounting for 27% of capital raised ahead of energy and power (13%) and telecommunications (11%). In terms of deal volume, industrials led the pack again, accounting for 18% of the global total, sharing a leading position with health care (15%) and high technology (14% of global IPOs).
With many equity market indices around the world at all-time highs – or at least at levels not seen since 2007 – valuations are soaring. This is strengthening investor appetite for new listings as well as encouraging private equity and venture capital funds to seek exits from their investments, creating a virtuous cycle of appetite and reward. A key engine of this cycle is the financial sponsors who drive a significant proportion of IPO activity. In 1Q15, PE- and VC-backed IPOs represented 17% of deal volume worldwide and 32% of capital raised. These figures were even higher in the US and Europe – 55% and 37% by number of IPOs and 51% and 54% by proceeds respectively.
Increased volatility will impact IPO activity
Through the remainder of the year, IPO activity is set to pick up but will be characterized by regional variation and increasing volatility caused by a variety of external factors, from elections to changes in monetary policy, according to Pinelli. “As volatility increases, opportunities will remain, but conditions may be less predictable,” she said. “The level of withdrawals or postponement may rise and companies looking at an IPO will need to be able to move quickly when market windows are open as they might not stay open long.”
“Against this backdrop, companies will want to keep their options open and run multitrack strategies – assessing M&A alongside IPO, and evaluating multiple potential exchanges to deliver optimal IPO pricing to shareholders. We note the rise in popularity of large, late-stage investment and new infrastructure, such as the NYSE-backed ACE Portal or NASDAQ’s Private Market, to support pre-IPO companies. Such developments show the funding ecosystem is in robust health, constantly evolving and as such it’s working well for entrepreneurs and investors.”
EMEIA ranks first by capital raised
With US$16.8b in proceeds, EMEIA ranked first for volume of capital raised, ahead of both the US and Asia-Pacific, and with 67 IPOs was second only to Asia-Pacific in terms of number of deals. London led the way with a combined total of 17 new listings on London Main Market and AIM together, raising US$3.4b. By capital raised, the Bolsa de Madrid ranked second among exchanges worldwide in 1Q15, driven by the quarter’s largest IPO, the US$4.8b listing of Spain’s state-owned airport operator Aena SA.
Pinelli said: “In 1Q15, European deals accounted for five of the top ten deals globally. Financial sponsor-backed IPOs are at a record high, featuring in four of the top five European deals. There is a robust IPO pipeline and healthy investor appetite across the region, driven by supportive monetary conditions – including the recently implemented program of quantitative easing – healthy investor appetite and high valuations. Despite ongoing geopolitical tensions, we believe the fundamentals are strong for more EMEIA activity through the remainder of the year.”
US IPO market takes a pause
The US saw just 38 IPOs in 1Q15, with proceeds of US$5.6b – down from 71 deals, which raised US$12.0b in 1Q14 – putting it behind Asia-Pacific and EMEIA by both measures this quarter. US exchanges produced only one of the worldwide top ten IPOs in the quarter as NASDAQ fell to third place by number of deals on the global leader board, and NYSE dropped to third place by proceeds.
Pinelli said: “In 1Q15, the US IPO market paused to take a breath following the busiest year since 2000. Although this depressed volumes and proceeds for the quarter, we can see the pipeline is rebuilding. Fundamentals remain strong. With equity indices at record levels and low volatility, the IPO market is poised to come back strongly. Companies across all sectors are preparing to go public and, with investor confidence high, there are plenty of opportunities for companies that can offer a compelling value proposition.”
Asia-Pacific leads by deal volume
With 145 IPOs raising US$15.8b, Asia-Pacific saw more deals than any other region in 1Q15.
Four of the world’s ten largest IPOs in the first quarter were in Asia-Pacific, spread across Malaysian, Thai, Chinese and Hong Kong exchanges. These included the US$3b IPO of Malaysia’s 1MDB Energy (expected by end of March) and Thailand’s Jasmine Broadband Internet Infrastructure Fund IPO, which raised US$1.7b in January.
Pinelli said: “Asia-Pacific will see solid IPO activity in the coming quarters, driven by stimulus policies in Japan, and an expected pick up in the flow of IPOs across Australia and Southeast Asia. Additionally, listing activity in China is expected to gather pace in 2H15, with the country’s regulator likely to relinquish its control over new listings. The move would speed up the approval process, which would encourage companies to list on domestic exchanges.”
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About the data
Analysis included on this press release includes all deals listed up to mid-March and EY’s expectation of deals that will close in the rest of the month. Data sourced from Dealogic as of 17 March 2014. January 2015 through March 2015 (i.e., 1Q15) IPO activity is based on priced IPOs as of 17 March and expected IPOs by the end of March.
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EY is a leader in helping to take companies public worldwide. With decades of experience our global network is dedicated to serving market leaders and helping businesses evaluate the pros and cons of an IPO. We demystify the process by offering IPO readiness assessments, IPO preparation, project management and execution services, all of which help prepare you for life in the public spotlight. Our Global IPO Center of Excellence is a virtual hub which provides access to our IPO knowledge, tools, thought leadership and contacts from around the world in one easy-to-use source. For more information, please visit www.ey.com/ipocenter.
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