Q1 2013 Global IPO update
- US most active region globally by some margin
- Despite slow IPO activity, market conditions in Europe are the best the for some time
- Real estate sector leading activity globally
London, 27 March 2013 – Global IPO activity dropped in Q1 2013, according to Ernst Young’s Global IPO update. So far this quarter, a total of 118 deals have raised US$18.2b, a drop of 51% on capital raised and decrease of 41% in volume in Q4 2012. However, activity was up 1% by capital raised and 42% by deal volume, compared to the same quarter last year. A further 31 deals are expected to raise around US$5b by the end of March.
The largest deal this quarter was the listing of a US pharmaceutical business, Zoetis, for US$2.6b. Globally, there were five IPOs raising over US$1b, compared to only one in Q1'12 and nine in Q4'12. Average deal size increased 75% to US$154m, compared to US$88.2m in Q1’12, although this represents a 17% drop compared to Q4'12 (US$185.9m). Two IPOs have been postponed and 15 withdrawn in Q1’13, compared to two and 51 respectively for Q1’12.
Maria Pinelli, Global Strategic Growth Markets Leader at EY comments: “This year has got off to a slow start but we believe that prospects for the second half are much more positive. The pipeline is robust and we are aware of a minimum of 300 new companies globally that are actively preparing to list in 2013. Governments around the world are continuing to take action to support entrepreneurial businesses, which will encourage more activity on junior exchanges.”
US market very positive
In Q1’13, US stock exchanges raised US$6.7b from 24 IPOs, accounting for 37% of global capital raised this quarter and making the US the most active region globally by some margin. Although this was a solid result, capital raised was up 4% compared to Q1’12 (US$6.4b from 41 deals) but down 24% compared to Q4’12 (US$8.9b from 33 deals).
The NASDAQ and New York exchanges topped the global league tables in terms of number of deals and capital raised. NASDAQ led by number of deals (12 deals, 10% of global activity, which raised US$1.5b, 8%) and the New York exchange was top overall in terms of capital raised (US$5.2b, 29% of global capital raised) and second by deal numbers (11 deals, 9% of global volume).
With macroeconomic conditions improving, the Dow Jones Industrial Average in March reached its highest point since October 2007, means that market sentiment in the US is very positive. Although uncertainty remains over the fiscal cliff, conditions are right for good companies to come to market.
The US IPO pipeline is building fast, PE backed companies are expected to contribute further to this growing pipeline. “To date, there are more than 60 PE-backed companies in active registration, which could raise more than US$12b. As the equity markets continue to improve in the US, and PE firms seek out exit opportunities for investments, we will see more PE-backed companies coming to market," comments, Jeffrey Bunder, Global Private Equity Leader at EY.
According to Gary Schweitzer, EY IPO Leader for Russian and the CIS, “There is a pipeline of Russian technology companies that are either in the process of or planning a US IPO and taking advantage of the Emerging Growth Company option. If the US markets hold their current level or continue to rise, I expect to see more IPOs into the US.“
Conditions in Europe improving
In Q1’13, European stock exchanges raised US$2.7b from 15 IPOs (accounting for 15% of global capital raised this quarter). This was a drop of 4% in terms of capital raised compared to Q1’12 (39 deals raising US$2.9b), but a 69% drop on Q4’12 (34 deals which raised US$9.0b). However, improving market confidence, particularly as financial risks recede in the region’s largest markets, including the UK and Germany, bodes well for the second half of the year.
Maria Pinelli comments: “New government initiatives to grow market access for fast-growth firms will also be important for the remainder of 2013. For example, proposed IPO rulebook changes in the UK send a positive signal to companies and investors, and are expected to open up a new route to the IPO market for some companies. “This combination of a supportive regulatory environment, together with strengthening market indices, mean conditions are the best the region has experienced for some time. However, Italy is still a significant uncertainty and its political and economic difficulties are casting a shadow across businesses operating in the Eurozone.”
Gary Schweitzer comments: “These new initiatives in the UK may not directly benefit Russian companies, but there are several Russian government and non-government entities looking at ways to improve the access to capital for Russian high growth companies.“
Asia off to a slow start
Deal volumes have reduced dramatically in Asia in Q1’13. Asian stock exchanges raised just US$5.1b in 58 IPOs, accounting for only 28% of global capital raised this quarter. Capital raised was down 38% compared to Q1’12 (US$8.4b raised, from 97 deals) and a 62% drop compared to Q4’12 (US$13.5b from 90 deals).
The decline is due to a halt in listings on Chinese exchanges since November 2012. The expectation that the regulator will introduce closer scrutiny for potential listings when markets reopen is doing little to fuel confidence. There were no Chinese IPOs on mainland China exchanges in Q1’13, and a reduced deal volume in Hong Kong (US$1b, from 9 deals).
The IPO markets in Singapore and Japan fared better. Stock exchanges in these markets accounted for 62% of capital raised in the region in Q1’ 13. Interest in REITs (real estate investment trusts) remained particularly strong. Several large REIT listings, including the US$1.4b Mapletree Greater China Commercial Trust on Singapore exchange and the US$1.1b Nippon Prologis REIT IPO in Japan, were dominant. Attractive yields and tightening market conditions in commercial real estate drove their successful IPO performance.
Maria Pinelli says: “One success story coming out of Asia in this first quarter is Japan. This is another region of the world where the government is actively intervening in the market – this time with a US$100m investment in high-tech, high-growth companies. The pipeline is coming alive and we are seeing a significant uptick in interest from companies planning to list.”
IPOs by sectors
Real estate dominates the sector picture in terms of funds raised – accounting for over a third (34%) of global IPO activity (US$6.2b) and by number of deals (15%, 18 deals). Reflecting the Zoetis IPO, Healthcare (15%, US$2.8b) and industrials (9%, US$1.6b) were also active by capital raised. In terms of number of deals, industrials ranked second (14%, 16 deals) followed by consumer products (10%, 12 deals).
“Real estate IPOs dominate in Asia but in the US the picture is much more mixed; technology companies have not led the deal picture for the past couple of quarters but are still a significant part of the US IPO picture. Healthcare raised more money than any other sector in Q1’13, followed by energy and power. In Europe, real estate and financial services dominated in terms of the number of deals but the value was overwhelmingly in consumer products and services,” concludes Pinelli.
According to Gary Schweitzer, “The Russian government has a very ambitious privatization program that may bring significant liquidity to the stock exchange. This could result in increased IPO activity in the later part of the year.“
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