EY Global IPO Trends
2014 opens strongly
The global IPO market is off to a very good start in 2014. This has been the best performing first quarter since 2011 in terms of both number of IPOs and capital raised.
With the MSCI World Equities Index reaching an all-time high in March and volatility, as measured by the VIX index, trending downwards, investors' confidence and appetite for IPOs is off the scale. As a consequence, average deal sizes are 24% higher than the same time last year and six deals raising more than US$1b.
Regional performance varies
In developed markets where economic fundamentals are improving rapidly, the US S&P 500 reached an all-time high in March, the UK FTSE was at its highest level in 14 years and the German DAX and France CAC indices are at their highest level since March 2009. Against this backdrop, IPO performance was strong both in the US and in EMEIA.
Although economic fundamentals are less compelling in Asia, where the unwinding of US tapering is causing repatriation of investments and the slowdown in Chinese manufacturing held Asian equity indices back, IPO performance was nevertheless strong. With 110 IPOs raising US$18.1b in 2014 Q1, Asia-Pacific accounted for 47% by global deal number and 41% of global deal value. Seven of the quarter’s 20 largest IPOs were on Asian exchanges.
IPO activity was relatively slower in 2014 Q1 for Central and South America region, but this is expected to increase in the second half of 2014.
PE and VC are prime drivers of activity
Globally, PE and VC are prime drivers of IPO activity, accounting for 33% of global deal numbers; this compares to 73% of US IPOs and 26% of EMEIA IPOs. PE and VC have seized the opportunity presented by the wide-open IPO window to clear out ageing investments from their portfolios, realize gains for investors and lock in profits for reinvestment. However, Asia saw only 12% of PE- or VC-backed IPOs.
Globally, PE and VC exits via IPO span across all sectors, with more activity from the health care, technology, retail, consumer products and financials industries.
Three sectors are trending
Three sectors that led globally by capital raised in 2014 Q1 were energy, technology and real estate. Although technology may not always be the leading sector in any geography, it is often the new or innovative technology which is the driving force behind the popularity and success of the leading sectors.
As boundaries blur between technology and industries, companies may move away from traditional sector categorization in an effort to maximize valuation as they come to market.
Pipeline is looking strong
Looking ahead toward prospects for the first half of 2014, we are optimistic that the growth in IPOs will be sustained. The pipeline is extremely healthy with more than 1,000 companies registered around the world and a particularly strong run anticipated in China, the US and EMEIA.
We hope that you find this report useful and would be happy to provide further insight on request.
Maria Pinelli, Global Vice Chair, Strategic Growth Markets, EY