Private Equity, Public Exits Q2 2014 digital edition
Strong global equities markets, rising investor confidence and increased macroeconomic stability are leading to another record year for PE-backed IPOs.
The good news is global. A continued robust environment in the Americas, a resumption of issuance in mainland China and a regional recovery in EMEA are all driving activity.
The pace of IPO issuance has some fearing a summer slowdown, but we think such concerns are overblown. The second quarter of 2014 saw record amounts raised by PE-backed companies, and the pipeline remains strong.
After years of stop-and-start activity, investors are clearly favoring a risk-on stance, allocating significant portions of their portfolios to new issues. Barring any systemic disruptions, year-end volumes might even double last year’s record activity.
PE-backed IPOs on pace for another record year
Last year saw a record for PE-backed IPOs, with 187 deals raising US$58.5b. Just six months into 2014, the value of PE-backed IPOs has nearly matched last year’s total.
PE-backed companies have raised US$55.9b across 134 deals so far this year. The second quarter was particularly active. PE-backed companies raised a record US$38.1b in 87 separate deals, a significant increase from Q1.
EMEA deals see fourfold increase in Q2 over prior year
The strength of the EMEA market is perhaps the top story for PE in 2014. Firms have raised US$24b in new offerings, taking 51 companies public. This is a 200% increase compared to the first half of last year.
The second quarter accounted for the bulk of the activity, with new offerings valued at US$16.5b, more than four times the amount raised in Q2 2013.
Secondary offerings continue to grow
Primary offerings are not the only issues seeing activity from PE firms. Secondary offerings have grown markedly on the back of strong equities markets.
PE firms have raised US$58.9b across 178 separate follow-on deals in 2014, on track to exceed the US$109.2b raised in 2013.
Pipeline moderates on high deal volume but remains robust
The pipeline moderated in Q2, as companies executed on their IPOs at a faster rate than the pipeline could replenish itself.
Nonetheless, the pipeline for new deals remains solid. There are currently more than 100 PE-backed companies in registration to go public, and they are set to raise more than US$20.3b in total.
Rising energy prices and strong investor demand for energy stocks are helping drive new PE-backed issuances. Last year, just one IPO in the sector priced in the first half of the year, raising US$131m. Thus far in 2014, eight such deals have raised more than US$6.2b, and there are more in the pipeline.
Other active sectors include consumer goods and services, retail and technology.