PE-backed IPO values see four-fold increase in first three quarters of 2010, compared to same period in 2009
• US listings almost 50% of total value in 2010
• Nearly half of deals priced below range in 2010
• Fewer withdrawn deals in Q3
London, 12 October 2010 – PE-backed companies have raised US$21.6b in 94 separate listings in the three quarters of 2010, a remarkable increase over the same period a year ago, when 17 companies raised US$5.2b, according to the quarterly Private Equity, Public Exits research by Ernst & Young
However, sponsored activity slowed in the third quarter, with 28 PE-backed companies raising US$5.7b, a 34% decrease from Q2 2010 and the slowest period since the third quarter of 2009. Activity was centered in the Americas, where 21 companies raised more than US$4.4b. Six Asia-Pacific listings raised US$1.3b, and in EMEIA, just one listing raised US$29m.
John Harley, Global Private Equity Leader at Ernst & Young says:
“The lack of PE exits by IPO in EMEA stand in stark contrast to the Americas and Asia-Pacific where IPOs are a more frequent realization route. However, while EMEA saw fewer deals overall, the top five PE-backed IPOs so far in 2010 are EMEA-based companies.”
US listings almost 50% of total value in 2010, but Europe sees larger deals
So far in 2010, Americas listings have represented 57% of new sponsored issuance and accounted for approximately 50% of total value. The Americas are followed by Asia-Pacific, with 30% of the total volume, and approximately 20% of total value. Europe has seen a relatively small number of deals so far this year – only 13% of the 2010 IPOs to date – but as the companies have tended to be larger, they have accounted for approximately 30% of total money raised.
Pricing remains challenging, but fewer withdrawn deals in Q3
During the third quarter only three deals priced above their expected range – RealD, QlikTechnologies, and ChinaCacheInternational. Since the beginning of the year, only 11% of PE-backed deals have priced above range, with nearly half having priced below.
The difficult pricing environment has led to a number of withdrawn deals throughout the year, though the trend showed marked improvement in the third quarter – just two PE-backed deals withdrew or postponed their IPO plans.
Harley comments: “The upside to the aggressive pushback in pricing is that there has been largely positive response to PE-backed IPOs. Eighty-two per cent of Q3 deals closed out in September at or above their offering price. In contrast to the early part of the cycle, when investors sought stable cash flows and solid balance sheets, investors have been particularly receptive in recent months to high-growth stories.”
Future outlook
New PE-backed filings continued in the third quarter as PE firms sought liquidity for limited partners. There were 39 new filings in Q3, a reduction from Q2’s frenetic pace, but in-line with historical norms.
Harley concludes: “The next 18-24 months will be an interesting time for PE as they look to exit some of their highest profile buyouts from 2006-07. Recent filings include theater chain AMC Entertainment and internet communications company Skype Technologies. They join a number of PE portfolio companies waiting to go public in significant offerings, including Toys R Us, Univar, Nielsen Corp, and HCA, which at US$4.6b, could be the largest sponsored IPO on record.”
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