Private Equity, Public Exits Q3 digital edition
Sixty-two percent of companies acquired in 2006 and 73% of those acquired in 2007 have yet to be exited, according to recent data (see note). At current run rates, it could take PE firms more than seven years to exit the current North American portfolio and as many as 11 years in EMEA.
However, those figures might be too pessimistic.
The global economy is improving, and market sentiment is high and rising. At the same time, performance of PE-backed companies has improved, and the IPO pipeline has grown rapidly.
This digital edition of our Private Equity, Public Exits quarterly report reveals six common themes for Q3 2013, including a few unexpected developments.
PE-backed issuance is up 77% over 2012
PE-backed activity peaked in the second quarter of 2013, when sponsored firms raised US$14.0b across 42 IPOs, making it the most active three-month period of the last two years.
Activity moderated in Q3, as investors became more cautious anticipating the end of the Federal Reserve’s quantitative easing program. Nonetheless, 34 companies raised US$7.7b in new IPOs during the quarter, bringing the total proceeds raised by PE-backed companies to US$29.7b – a 77% increase over the same period in 2012.
IPOs make an unexpected return in Europe
Business remained centered in the Americas, which accounted for more than 60% of PE-backed activity.
However, activity in Europe is picking up, buoyed by rising investor confidence and a slowly improving macro picture. PE-backed IPOs in EMEA increased from just four in the first nine months of 2012 to 20 over the same period in 2013. Deal value increased from US$2.2b to US$9.0b.
Falling valuations continue to challenge IPO issuance in the Asia-Pacific region (APAC). Also, the market in China remains closed to new issues, with many of China’s PE-backed companies now looking at alternative exit routes.
While PE exits by M&A are down in both the US and Europe compared to 2012, M&A exits in APAC are up 20% by value and 8% by volume over last year.
PE-backed deals deliver strong post-IPO performance
Strong investor demand and post-IPO performance have driven the robust issuance this year.
PE-backed IPOs on average delivered a 12.7% first-day increase from their offer price. They closed the quarter 18.1% above their offer price on average.
PE-backed follow-on offerings remain strong
Strong global equity markets continue to enable robust issuance of follow-on offerings. Through the end of the third quarter, PE-backed companies have raised more than US$80b in follow-on deals, a record amount.
Moreover, debt markets remain open for a range of issuance, including dividend-related issues. Sponsored dividends have raised over US$44b in 2013, up from the approximately US$25b raised over the same period last year.
PE-backed pipeline is very healthy
The second quarter of 2013 saw 56 companies file for IPOs, and another 57 filed in Q3. This is roughly twice the rate of the first half of 2012.
There are approximately 70 companies in active registration, poised to raise more than US$17.7b in total.
IPO markets stay solid across sectors
The financial sector reaped the largest proceeds (US$5.3b) in the quarter, while health care saw the largest number of deals (22). Materials and consumer goods round out the top four sectors.