Private Equity, Public Exits Q4 digital edition
Surging investor confidence across many developed markets and improving economic fundamentals in 2013 led to one of the strongest markets on record for PE-backed IPOs. Through 12 December, companies backed by PE firms completed 181 IPOs with combined proceeds of US$57b, the second-highest amount on record.
The strength of the IPO market is welcome news for PE firms and their investors, who continue to hold many companies acquired during 2006-07. Over the last several years, the IPO window has been extremely volatile - opening for short periods but then closing rapidly in response to the latest failed deal or macroeconomic challenge.
Throughout, PE firms have diligently continued to operate and improve their portfolio companies as they awaited optimal conditions for exit. That period may be upon us. Given rising growth in the US and increased stability in Europe, the market appears to have a new resilience that should lay the groundwork for a sustained period of robust issuance.
PE-backed IPOs have strongest year since 2007
PE-backed IPOs raised US$57b in 2013, more than twice the amount raised during the same period in 2012. This marks the second-highest total on record, behind 2007, when PE firms raised US$58.4b.
Through 12 December, 181 deals had priced, compared to 110 for all of 2012. The fourth quarter was particularly active. In October and November alone, PE-backed IPOs raised US$20.4b, the highest since Q2 2007.
EMEA PE-backed IPOs stage big return
Perhaps the most significant development in 2013 was the return of Europe’s IPO markets. In 2012, there were just six PE-backed IPOs which raised US$2.3b.
This year, PE firms raised US$16.1b across 32 separate IPOs. Approximately one-half was raised in London; however, Paris, Frankfurt and Milan each saw PE firms raise more than US$1b in IPOs.
2013 sees largest proportion of IPOs backed by PE firms
Over the last several years, PE firms have become an increasingly important driver for the IPO markets. In 2007, PE firms accounted for 10% of global IPOs; in 2008, they accounted for just 6% of global IPOs.
In 2013, companies backed by PE accounted for 19% of firms that went public globally. Moreover, they tended to be larger; PE-backed deals accounted for 35% of all proceeds raised this year.
Financial services is top sector
Financial services was the most active sector, accounting for more than 20% of total PE-backed IPO proceeds. A recovering real estate market played a key role here; deals in the sector raised more than US$5.0b in 2013.
Companies beyond the real estate sector also benefited from rising real estate prices. In the building industry, 12 companies collectively raised nearly US$4.5b during the year.
PE-backed IPO performance is robust
Longer hold periods have enabled PE firms to spend more time making operational improvements in their portfolio companies. Public market investors are responding with strong demand for PE-backed deals.
Year-to-date, PE-backed IPOs on average delivered a 13.0% first-day increase from their offer price. Through 12 December, they were 18.6% above their offer price on a weighted-average basis.
Outlook for 2014 is strong
PE firms are filing for IPOs at an accelerated pace. Currently, there are nearly 60 companies in the PE-backed IPO pipeline, which could raise more than US$14.0b in total.