Global IPO activity slows in Q3 but set for uplift in coming months
- Volume of US IPOs surpass 2012 total; six of Q3’s 10 largest listings on US exchanges
- Investor sentiment improving in Europe; PE a driver as larger deals dominate
- Deal volume in Asia up from Q2; flow of IPOs predicted for Hong Kong
London, Moscow 3 October 2013 – Global IPO activity fell in Q3 2013, with projected activity set to reach nearly 200 deals with IPO proceeds of around US$24.4b, according to EY’s latest quarterly Global IPO Trends Report. Based on the projected Q3 2013 totals, global IPO activity is expected to be down 4% in terms of deal numbers and 47% in terms of deal value, compared to Q2 2013 (206 IPOs, US$46.2b). For the first nine months of 2013, around 566 IPOs are expected to raise US$94.8b. Expected deal numbers is lower but total proceeds are expected to be higher in the same period in 2012 (637 listings which raised US$91.4b).
Maria Pinelli, EY’s Global Vice-Chair of Strategic Growth Markets said:
“Despite a comparatively quiet third quarter – in line with historical trends of slower activity over the summer months – global IPO activity is expected to lift through the remainder of the year and into 2014. The uplift in activity will vary from region to region both in terms of timing and pace. The US market is expected to continue its strong momentum and we expect stronger IPO activity from European exchanges, especially from UK and Germany, as well as from South East Asian exchanges.”
US dominates activity in the Americas
To the end of Q3 2013, US exchanges are projected to raise US$11.8b from 65 IPOs, accounting for 33% globally in terms of number of deals and 49% by capital raised. Health care is likely to be the most active sector by number of deals and rank second by capital raised (21 IPOs, which raise US$2.4b ). Technology the second most active by deal numbers and third by capital raised (12 IPOs, US$1.4b). Energy will be the most active sector by proceeds and third by deal number (9 IPOs, US$3.4b). Expected average deal size on US exchanges in full Q3’13 will be approximatelyUS$182m, this compares to the average deal size of US$116.3m for Health care IPOs and US$119.8m for technology IPOs. The US is expected to account for six of the largest 10 IPOs globally, including the largest in Q3, the listing of Envision Healthcare Holdings Inc. on NYSE, which raised US$1.1b.
Jackie Kelley, EY’s Americas IPO leader comments:
“In the first three quarters of 2013 the US has surpassed its total number of IPOs for 2012. We have seen the highest volume of health care (biotechnology and pharmaceuticals) IPOs since 2007. Average deal size continues to trend lower, because of the higher number of health care and technology IPOs that came to the public market. Pricing remains a top concern for investors – some pricing pressure continued in Q3 but average post-IPO first day returns trended higher (14.2% for Q3 listings), outperforming the S&P 500 index and pointing to sustained activity in the US. In contrast, IPO activity in Central and South America remains soft due in part to softer economic fundamentals, but we are seeing improvement year-on-year.”
Investor sentiment strengthening in Europe
Europe is projected to see 30 IPO with expected proceeds of US$3.0b in Q3 2013. This would account for 15% globally in terms of number of deals and 13% by capital raised. Number of deals has decreased by 29%, while capital raised has fallen by 36% compared to Q2 2013 (42 IPOs, US$4.8b). It should be noted that the level of capital raised in the first three quarters of 2013 (101 IPOs with expected proceeds of US$12.9b) is up 204% on the same period in 2012 (130 deals, US$4.2b). Real estate is expected to be the leading sector in Europe by capital raised, accounting for 59% of proceeds in the quarter, driven by the region’s two largest IPO in the quarter, Deutsche Annington Immobilien GmbH, which raised US$738m on the Frankfurt Stock Exchange and Foxtons Group plc which raised US$558m on London’s Main Market last week. While the technology sector is projected to lead by deal numbers, accounting for 27% of IPOs on European markets.
Dr Martin Steinbach, EY’s EMEIA IPO leader said:
“Europe is seeing more mid-sized and large IPOs coming to the market, with private equity-backed IPOs being a key driver, particularly in the mature economies of the UK and Germany,” says Steinbach. “With economic conditions stabilizing and regional debt markets steadying, market volatility has subsided and valuations are improving. We believe the conditions are right for an increase in public listings in Europe in the remainder of 2013.”
Asia poised for IPO upturn
There are 78 IPOs expected on Asian exchanges, with proceeds of US$6.4b in Q3 2013. This would account for 40% of global number of deals and 26% by capital raised. Deal number is expected to be 26% higher from Q2 2013 but capital raised fell by 59% in Q2 2013 (62 IPOs, US$15.6b). Real estate is expected to be the most active sector by deal number and capital raised (11 IPOs raising US$2.1b). Consumer staples (7 IPOs, US$1.5b) and Energy (9 IPOs, US$0.9b) sectors are expected to lead by capital raised.
Ringo Choi, EY’s Asia Pacific Strategic Growth Markets leader commented:
“The ongoing suspension of new listings on mainland China exchanges has affected IPO activity level in Asia. A drop in IPOs in Japan, following a blockbuster Q2, also weighed on total proceeds in Q3. Activity on other exchanges also softened, reflecting weaker economic and market conditions, though Singapore was one exception, with expected proceeds in Q3’13 up 39% on Q2’13 to US$1.7b, on several larger real estate offerings. However, conditions in the region are expected to improve in the final months of 2013 and 2014 with a growing list of companies planning to conduct large IPOs in Hong Kong and Japan, and when the IPO markets in Mainland China are re-open. We also expect more IPO listings from emerging markets such as Thailand, Singapore, Malaysia and – to an extent – Indonesia.”
Maria Pinelli concludes, “In Q4’13, global IPO volume could reach 200 – 250 listings, generating proceeds of around US$30 – 40b, in line with Q4’12 levels. Investors have been encouraged by rising valuations but moving forward, pricing remain a critical concern. In this market, more than ever, firms need strong brand names or earnings track records to obtain appropriate pricing and secure investor support.”
Click here to download EY’s latest quarterly Global IPO Trends Report for extended analysis and commentary.
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