Global IPO market has strongest first quarter since 2011
- Highest activity in January for 10 years and positive first quarter points to strong global IPO activity in 2014
- Asia leads the way in deal numbers and value, as mainland Chinese exchanges reopen
- Private equity and venture capital drive IPOs in the US and Europe
Beijing, Shanghai and Hong Kong, 26 March 2014 – A positive first quarter points to strong global IPO activity in 2014, according to EY Global IPO Trends: Q1 2014. There was a total of 239 deals raising around US$44.3b in Q1’14, continuing the market momentum built up in a strong end to 2013. Compared with Q1’13, deal numbers were 47% higher and capital raised was up 82% (163 deals, US$24.4b), making this the most active first quarter since 2011. January was stronger than normal, with 101 IPOs raising US$18.5b, the largest amount of capital raised in the first month for over a decade.
2014 poised to be an excellent year for IPOs
Terence Ho, EY’s Greater China IPO Leader says: “A combination of rising equity indices and lower volatility set the global IPO market off to a strong start in the first quarter.
“We believe this points the way to sustained high levels of activity through the first half of 2014.”
Financial sponsors are a key driver
Globally, private equity (PE) and venture capital (VC) were key drivers of IPOs in the first quarter, accounting for 33% of global deal numbers, with the US and EMEIA reporting 72% and 26% of sponsor-backed IPOs, respectively.
Ho adds: “We expect that PE will continue to seize the opportunity presented by the wide open IPO window to clear out aging investments from their portfolios, realize gains for investors and lock in profits for reinvestment.”
Mainland Chinese exchanges reopen
With 103 IPOs raising US$16.9b, Asia was the most active region in Q1’14. Asian exchanges accounted for 43% of global IPO activity by deal number and 38% of capital raised.
“With the reopening of mainland China’s stock exchanges delivering the predicted run of new listings, and a pipeline of around 700 companies ready to go public, Asia will continue to see a high number of IPOs” says Ho.
“Activity was led by 48 new listings in Mainland China which raised US$5.4b. While Hong Kong raised US$4.7 b with 18 IPOs, which represented a 80% increase in deal number and 343% increase in capital raised compared to Q1’13 (10 IPOs, US$1.06b raised). Investors will continue to have an abundance of investment options in Asia, in terms of location, sector of investment and type of fund raising instrument.”
Seven of the quarter’s 20 biggest IPOs were in Asia, including the largest – the US$3.1b listing of HK Electric Investments Ltd on HKEx in January, while Japanese exchanges had three listings in the top 20, Shanghai exchange saw two listings and Bursa Malaysia saw one listing.
Solid US performance
NYSE ranked first while NASDAQ ranked fifth by global capital raised by individual exchanges in Q1’14, together they raised US$11.6b in 68 deals. In 2014 so far, 72% of deals and 86% of proceeds raised in the US were backed by PE and/or VC firms.
“The combination of attractive valuations and solid after-market performance means that, like in Europe, financial sponsors are actively pushing companies to list” says Ho.
As companies seek to ride the momentum of US capital markets, the US is also continuing to attract IPOs from around the world. There were 11 foreign listings which raised U$1.9b in Q1’14, accounting for 16% of US IPOs number and deal value, with even higher numbers of deals to come for the remainder of 2014. A number of billion plus deals such as Alibaba and JD.com are also anticipated in the months to come.
In terms of sectors: “We think health care, technology and energy companies will continue to drive deal activity through 2014” says Ho. “As confidence has grown, US investors are more willing than ever to back disruptive, innovative businesses that have a higher risk profile but offer significant longer term growth potential.”
UK leads in EMEIA
The EMEIA region saw 58 IPOs raising US$14.4b in Q1’14 - an increase of 9% in deal number and 108% in the capital raised compared with Q1’13. The UK main market saw 8 IPOs which raised US$4.6b, while the junior market, AIM had 16 IPOs which raised US$2.0b – together they account for 41% of EMEIA’s deal number and 45% by capital raised. In Europe, equity indices are trending upwards, taking PE, corporate and investor confidence with them. Building on strong IPO momentum from 2013, market sentiment in the Middle East and North Africa is also positive.
Ho says: “Large pools of liquidity seeking above-inflation investment opportunities combined with a rising appetite for risk are feeding growing investor interest in equities and IPOs in EMEIA.”
Retail was the leading sector by some margin in Q1’14 in EMEIA. For the rest of 2014, industry performance will be broadly positive across sectors, and we expect investors will continue to favor technology companies and those with strong brand names.
Prospects are bright for the second half of 2014
Ho concludes: “We expect Q2’14 and the second half of 2014 will extend the sharp growth trajectory established in Q1’14. Geopolitical shocks aside, with sound economic fundamentals and strong global liquidity fuelling new listings, the global pipeline is looking extremely healthy. We believe that IPO activity will come from a broad range of geographic markets and from multiple sectors, including technology, real estate, energy and health care.”
Notes to editors
Analysis included on this press release includes all deals listed up to early December 2013 and EY’s expectations of deals that will close in the rest of the month. Data sourced from Dealogic as at 18 March 2014. Q1'14 IPO activity is based on priced IPOs as of 18 March and expected IPOs by end of March.
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|Sector||Number of deals||% of global deal number||Proceeds (US$ M)||% of global capital raised|
|Media and entertainment||15||6.3%||$3,904||8.8%|
|Consumer products and services||14||5.9%||$3,051||6.9%|