Asia has been a key driver of the IPO resurgence as the global economy emerged from recession.
The global IPO markets showed remarkable resilience in 2011. With economic recovery gaining momentum and a solid pipeline of profitable companies ready to list, the first half of the year was strong.
Unfortunately, Europe’s debt problems resurfaced at the halfway point and other nations exhibited slower economic indicators, making conditions difficult for the rest of the year. However, even with many of the world’s strongest IPO markets effectively closed for last six months of 2011, the fundraising levels they managed to achieve were impressive.
Global IPO statistics
In 2011, we saw IPO companies and their potential investors adapting to a new market environment, one in which volatility has become the norm. Timing this market is an art; the windows when conditions are favorable for an IPO are short and unpredictable. Companies need to prepare earlier, and be ready to move fast.
Short–term concerns aside, 2011 saw the continuation of many of the trends that have driven global IPO markets for a few years now — the rapid growth of emerging markets and the rise of China, in particular. These trends have continued into 2012.
Developed markets peaked intermittently during the year, in key industries such as technology, mining and metals and healthcare, and there was a growing number of private equity and venture capital-backed IPOs. Volatility will remain with us, too, although probably at a reduced level.
Europe may not resolve its sovereign debt problems, but it should at least agree upon a way forward — that in itself would remove a significant weight from the IPO markets.
A year of two halves
The global IPO markets got off to a promising start in 2011, with two solid quarters, continuing the pace of 2010. However activity dropped dramatically midway through the year, principally due to investor concerns about sovereign debt issues in Europe and Standard & Poor’s downgrade of the US’s credit rating.
Capital raised globally in the year declined by 40% to US$169.9b, compared to 2010. Around 66% of the global capital raised in the year was secured in its first six months. The number of deals was down by 12% in 2011 at 1,225 IPOs compared to 2010.
The headline figures might be gloomy, but fundraising activity in 2011 still exceeded 2009 activity of US$113b by around US$57b.
Asian exchanges (including India) led the world in bringing new companies to market in 2010, and this trend continued last year. We also saw a higher proportion of private enterprises wanting to go public.
Nevertheless, the Asian markets could not avoid the uncertainty and volatility that hurt IPO markets elsewhere. Its exchanges completed 610 deals in 2011 raising US$87.5b, a 50% drop by capital raised compared to 2010.
The Shanghai and Shenzhen Stock Exchanges (SME and ChiNext) led the way, raising US$42.9b in 280 deals together. The Hong Kong Stock Exchange (HKEx) raised US$25.3b1 in 68 deals.
Asia will remain a key driver of IPO resurgence in 2012 as the global economy continues to improve.
US shows its resilience
IPO activity on US exchanges held up relatively well in 2011, given the very difficult circumstances. As with markets elsewhere, a strong performance in the first half of the year was followed by a disappointing outcome in the second. Overall, capital raised in 2011 fell by a modest 8% compared to 2010, to US$40.2b.
With the markets volatile and valuations uncertain, the number of IPOs fell from 2010 by 24% to 124 deals in 2011, but we expect to see this number increase significantly in 2012. There is a strong pipeline of around 200 companies ready to list, once conditions stabilize.
Hot sectors include technology, real estate, oil and gas, pharma and consumer retail. Private equity will continue to play an important role in the IPO market and we also expect to see a solid level of IPO carve-outs and spin-offs in 2012.
Europe looks for a way forward
Economic troubles in Europe blighted the world’s IPO markets last year, although surprisingly its stock exchanges accounted for a slightly larger share of global IPO funds raised — increasing to 17% from 13% in 2010.
However, IPO capital raised fell 19% compared to 2010, to US$29.7b and performance varied across the continent. The IPO market in Poland was very active, with 22 listings on the Warsaw Stock Exchange’s increasingly mature main market and a record 123 on NewConnect, its market for younger businesses.
In France, by contrast, 2011 saw the lowest total capital market financing — not only IPOs — since 1995. Activity was also slow in the UK, which is normally the region’s IPO powerhouse.
We entered 2012 without a solution to Europe’s debt problems, but there was a greater likelihood that policymakers would find a positive way forward.
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