Global IPO trends 2011 - Ernst & Young - Global

In 2010, global IPO activity recovered to pre-financial crisis levels and reached the second-highest fund-raising amount ever, after 2007.

Global investors seeking to capitalize on the emerging markets growth story have been fueling stock market rallies and new listings world-wide. The shortage of exit routes, lack of capital-raising and numerous listing postponements since the financial crisis in 2007 have created a growing IPO pipeline worldwide.

Even so, the current upward trajectory of global IPO markets in 2011 may not necessarily be smooth as global macroeconomic risks such as the sovereign debt crisis could yield market volatility. However, barring another unforeseeable crisis, 2011 global IPO markets are expected to be even more dynamic than in 2010.

Many key drivers of 2011 global IPO markets reflect many of last years’ top themes including emerging markets growth, state privatizations, multinational company spin-offs, and companies in the energy, industrial, materials and technology sectors.

Secondary market momentum is also expected to continue as companies ramp up their capitalization to record levels, particularly to support future acquisitions. Reflecting growing investor confidence around equity valuations and sharpened risk appetites, IPOs are expected in an even greater variety of sectors and geographies.

2011 Asian IPO outlook

Greater China
In 2011, Greater China looks set to maintain its five-year-long leadership of global IPO markets. Although growing inflation and the absence of jumbo IPOs may moderate Chinese IPO volumes, Hong Kong, the most active exchange in 2010, is expected to remain the world leader and raise over US$50 billion in 2011.

More large non-Asian companies, especially in the natural resources sector, are also expected to list in Hong Kong. Financial, consumer products, industrials and resources listings will be most prevalent in Hong Kong and Shanghai.

India
Propelled by India’s 8% GDP growth rate and healthy corporate earnings and prospects, India’s IPO markets will continue their dramatic recovery. More than 100 companies are expected to pursue IPOs and follow-on offerings, spurred by the country’s US$10 billion Government privatization program and its massive US$1 trillion infrastructure investment plan.

Japan
In 2010, Japan’s IPO market conditions improved with proceeds of US$14.6 billion in 22 IPOs, buoyed by an upswing in the Japanese stock market. Japan’s IPO fundraising rose 2,406% from 2009 (US$583 million).

2011 Americas IPO outlook

United States
At the end of February 2011, the growing US backlog contained about 150 companies slated to raise around US$40 billion.

The pipeline includes private equity (PE)– and venture capital (VC)–backed companies, fast-growth companies in technology, health care and real estate, companies based in China, large company spin-offs and US companies backed by money from the Troubled Asset Relief Program (TARP).

Brazil and Latin America
In 2011, Brazil expects about 30 IPOs with an average deal size of US$500 million, in the retail, oil and gas and mining sectors in particular.

Brazil’s IPO markets have been fueled by its 5% GDP growth rate, foreign capital inflows, the Government’s infrastructure investment plan and high domestic consumption levels. Mexico, Argentina and Chile will also see new issuances.

2011 European IPO outlook

UK
The UK pipeline of potential IPO candidates remains strong. Numerous crossborder listings on the London Stock Exchange (LSE) Main Market are expected, most notably from emerging market-facing companies. Europe’s financial institutions, including spin-offs from over-leveraged banks, could be the source of the largest IPO prospects.

Germany
Germany anticipates approximately 20 small cap IPOs from diverse industries to list on the “Entry Standard” segment of the Deutsche Borse.

Eastern Europe and Russia
The Governments of Poland and Czech Republic will continue to sell off state-owned assets to generate revenue. After Russia’s severe economic contraction in 2008–09, surging oil prices, state privatizations and a capital market revival may also lead to a return in Russian listings, on the LSE in particular.

Middle East and Africa
The 2011 Middle East IPO outlook remains dim. Companies in many Middle East countries are wary of listing, frustrated by poor valuations, sluggish GDP growth prospects and political unrest.

Private equity outlook

PE-backed IPO activity returned in 2010 driven by stronger capital markets activity, particularly in the emerging markets. Just as global IPO markets rebounded strongly in 2010, listings globally by PE firms were likewise robust, with 155 PE-backed companies raising US$35 billion, more than double the US$16.8 billion raised in 2009.

Global IPOs by number of deals and capital raised

Key global IPO statistics

Global IPO markets: 2010 saw choppy IPO revival until a record-breaking fourth quarter

2010 key trends

• In 2010, global IPO activity recovered to pre-financial crisis levels (US$284.6 billion, 1,393 IPOs) and reached the second-highest fund-raising amount ever, after 2007. After two years of quiescent IPO markets during the global financial crisis and recession, 2010’s healthy IPO volumes represent more than double the amount raised during either 2008 or 2009.
• Global IPO markets saw a choppy revival in the first three quarters of 2010, followed by a record fourth quarter. In the first three quarters, investor worries over Eurozone sovereign debt, sweeping regulatory changes, government reductions of stimulus packages and limited access to credit led to numerous IPO withdrawals, postponements and highly discounted pricing worldwide.

  However, investor confidence improved over the course of the year. Driven by Asian growth, pent-up demand for capital, sales of government-held assets and financial and industrial institution spin-offs, Q4 saw the highest quarterly total capital raised on record (US$131.5 billion, 484 deals).

• 2010 saw the world’s largest IPO ever and other high-profile jumbo IPOs. The largest IPO ever was the US$22.1 billion offering of the state-owned commercial bank Agricultural Bank of China followed in size by the second-largest IPO ever — the US$20.5 billion listing of AIA, the main Asian life insurance unit of AIG Group. And the return to the public markets of US automaker General Motors for US$18.1 billion marked the third-largest IPO globally in 2010.
• The vast majority (86%) of global IPOs priced within their initial filing range in 2010, compared with a historical 10-year average of 74.3%. Only 11% of IPOs priced below their initial prices while just 3% priced above. Nonetheless, investors remained extremely price sensitive, especially with regard to highly leveraged companies. Citing difficult market conditions, many companies had to withdraw or postpone their offerings in 2010 while others were sold in dual-track sale processes.
• Financial and infrastructural sectors prevailed, although IPOs were quite diverse. Investors continued to assess IPOs on a company-specific basis. The financial sector led by volume, at US$80 billion, with 28% of the global capital raised, thanks largely to three jumbo Asian insurance companies that made up three of the top 10 IPOs.

  They included the AIA listing; the US $11.1 billion Dai-ichi Life Insurance listing, the second-largest Japanese IPO on record; and the US$4.4 billion Samsung Life Insurance Co. Ltd., South Korea’s largest IPO ever.

  Propelled by continuing emerging market demand for commodities and global demand for energy, the industrial and materials sectors were also very active.

• Emerging market IPO volume made up 69% of global volume (US$195.3 billion via 983 deals). This includes 87 government sell-offs of numerous state-owned enterprises, worth US$81.8 billion, in order to raise cash. The vast majority of IPOs (67) came from China, with several top IPOs from India, Poland and Indonesia.

Global IPOs by number of deals and capital raised, by year

2009 and 2010 global IPOs by region

2010 global IPOs by domicile countries

2010 global IPOs by stock exchanges

---

Next »