Global PE-backed IPO activity has fallen dramatically in Q3’11
MOSCOW, LONDON, 17 OCTOBER 2011 – Global PE-backed IPO activity has fallen dramatically in Q3’11, as global fears of a double-dip recession have increased. A total of 21 companies worldwide raised just US$2.9b; this compares with 45 PE-backed IPOs worth US$17.4b in Q2’11 (an 84% decline in capital raised and 53% drop in number), according to Q3’11 Private Equity, Public Exits quarterly analysis by Ernst & Young. This is the lowest number since Q2’09.
Average deal size
The quarter did not contain US$1b listing. The largest listing was the July launch of Dunkin Brands by sponsors Thomas H Lee Partners, The Carlyle Group, and Bain Capital, which raised US$486.2m on Nasdaq. As a result, the average deal size globally was US$136m, compared with US$378m in Q2’11 (a 64% drop and the lowest number since Q1’09).
PE-backed IPOs postponement, withdrawal and filings
Results show that a number of companies have postponed or withdrawn their offerings in light of market conditions. This quarter, 14 companies have withdrawn or postponed their IPOs. This is the second highest level, since 2007, when 18 PE-backed IPOs pulled their offerings.
However, 44 sponsored companies still filed to go public, adding to the 132 that filed in the first and second quarters of this year, bringing the total PE-backed pipeline to US$22b. In addition, there were two high profile filings by PE firms – in June, Oaktree Capital Management filed to raise as much as US$100m in an IPO; followed by, The Carlyle Group filing on 6 Semptember. If successful, the Carlyle listing will put five of the top six PE firms in the hands of public investors.
Jeffrey Bunder, Global Private Equity Leader at Ernst & Young says, “Despite the increase withdrawals, Q3 contained a number of new filings, suggesting an underlying optimism in the return of market demand over the next 6 to 12 months. Historically, Q3 has been a slow quarter; however, the IPO market is currently not receptive to new listings as a result of the recent equity markets-performance and the economic outlook.”
North America still dominates as Europe and Asia stutter
Although the global IPO market has recently been dominated by Asia, Nasdaq and New York Stock Exchange remain issuers’ favorite IPO destination for PE backed companies. In Q3, the US led with nine deals valued at US$2b (84% decrease in capital raised compared to Q2).
Continues, Bunder, “IPOs which managed to launch in Q3 faced stiff headwinds as they worked to establish themselves in the secondary market. Despite this, strong performance from a number of new issues kept average post listing performance essentially flat for Q3 deals – globally, PE-backed deals declined only 0.6% relative to listing value on a weighted average basis.”
In Europe, just two IPOs priced in the third quarter, down from eight in Q2. In July, South African sporting goods retailer Holdsport priced 26.8 million shares at US$4.63 to raise US$124.5m on the Johannesburg exchange. The issue priced at the low end of its range, but has since trended higher – through to the end of the quarter, the stock was trading up 6.5% from its IPO price.
Issuers in the Asia-Pacific region executed ten IPOs in Q3, down modestly from the 12 that went public in the second quarter. Deal sizes however, were markedly lower, with companies raising just US$609m in aggregate, down from US$3.3b in Q2. The largest deal out of the region was by CITIC-backed Beijing Jangho Curtain Wall Company, which raised US$340.2m on the Shanghai exchange. The offering priced at the high end of its expected range, and closed out its first day of trading up 39.4%, despite a loss of 1.6% on the Shanghai composite index.
Concludes, Bunder: “Many very good PE-backed companies are still waiting to exit. As soon as the market stabilizes, expect to see an increase in the number of PE-backed IPO listings. Until then, PE firms are actively monitoring alternative exit channels, including sales to strategics and other PE investors, as the industry searches for liquidity.
About the report
Private Equity, Public Exits is published quarterly by Ernst & Young to provide insight and analysis on capital markets trends as they apply to the private equity-backed IPO market. Original data is sourced from Dealogic.
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