“IPO candidates will need to be flexible this year, keeping an open mind about when they list, and where.”
Dr. Martin Steinbach,
EMEIA IPO Leader,
Ernst & Young
The amount of funds raised across the region’s markets fell by 19% in 2011 to US$29.7b, but the number of successful listings actually increased by 6% to 266 deals. As with other IPO markets around the world, most of the activity took place in the first half of the year.
Performance varied enormously at a country level
The IPO market in Poland was very active. There were 22 listings on the Warsaw Stock Exchange’s increasingly mature main market and a record 123 on NewConnect, its market for younger technology businesses.
In France, by contrast, 2011 saw the lowest total capital market financing — including not only IPOs — since 1995. Activity was also slow in the UK, which is normally the region’s IPO powerhouse.
No quick fix to economic troubles
Europe’s sovereign debt crisis weighed heavily on its IPO markets last year. The fear that Greece might default on its debts, added to the inability of European policymakers to find a way forward, has damaged sentiment.
But as we move into 2012, there is greater confidence that, while a one–off fix may not be found, there is at least a growing consensus about how to deal with the problem.
IPO candidates will need to be more flexible
Market volatility is likely to reduce somewhat in 2012, but it will still be difficult for companies to get the timing of their IPOs right. Companies, advisors and investors will need to find a way to navigate this highly fluctuating market to find common ground, particularly concerning pricing.
Trends we expect to see in the market are: companies floating a smaller percentage of their equity; larger syndicates, so that companies are marketing to a broader investor base; more focus on earlier marketing; as well as efforts to find “anchor investors.”
Companies will follow the money
As conditions in Europe remain unpredictable, we may see more IPO candidates looking to float on an overseas market, perhaps as a dual listing. Certainly, candidates will question whether they should simply list on their home market by default.
Many will have good strategic reasons for listing abroad, especially those that want to develop awareness of their brands in Asia. We are likely to see emerging markets actively competing to attract European companies.
An increasingly important goal will be to combine a company’s business strategy with financing strategy.
The purpose of a stock exchange
Off–exchange transactions represented more than a third of equity traded in Europe last year. With so much activity bypassing traditional markets, we may see more IPO candidates looking at alternative ways of raising equity finance.
New intermediaries such as crowdfunding portals are giving companies direct access to investors and important newcomers like multilateral trading facilities entering the listing space, for example, could become increasingly popular in primary markets.
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