Global IPO activity expected to pick up in second half 2013

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The global outlook for IPOs in 2013 is more promising with strengthening equities markets and improved confidence in the economy.

EY’s Year End Global IPO Update, published in November 2012, showed that there were 768 IPOs globally down 37% from full year 2011, raising US$118.5b.

However, Maria Pinelli, EY’s Global Vice Chair Growth Markets, says:

“The US, Toronto, London, Frankfurt, and Moscow stock exchanges lifted significantly in the fourth quarter, thus suggesting that signs of stability in equity markets and supportive central bank policy are starting to take effect. We believe the market is likely to see smaller offerings initially while market and investor confidence builds.”

“Looking ahead to 2013, we expect a better outlook, with a strengthening US economy leading the recovery, followed in the latter half of the year by Europe and Asia. Reduced stock market volatility, assertive action from central banks and brighter economic prospects suggest 2013 could be the right time for companies currently in the pipeline to list."

Australian IPO Activity anticipated to increase in the second half of 2013

In Australia, there were 48 IPOs in full year 2012 with total capital raised A$894m – down 54% in volume and 47% in value compared to 2011. Anne-Maree Keane, EY Australia Transactions Partner, says the Australian equity market is in “relatively good shape” and is “on the up”.

“We’ve had a relatively stable economy for a while now and a strengthening equities market for the better part of the last six months.. We have seen more interest from businesses in the past few months looking at a possible IPO later in 2013 and there is an appetite out there from investors for good businesses with solid fundamentals. The interest rate environment is also assisting as the debt/equity balance is starting to look right,”says Keane.

“A lot of private businesses have been waiting on the sidelines for some time now. For businesses that have a positive outlook, are generating good cash flow and have low gearing, then now may be the time to being preparing for a potential IPO in the second half of 2013.”

“What businesses need to remember though is that preparation for a listing usually takes at least six months – proper preparation is a crucially important success factor,”she says.

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Looking ahead: global IPO activity and industry trends for 2013

The number of deals fell 46% from 255 deals in Q4 2011 to 136 deals in Q4 2012, whereas by capital raised, it only fell 6% from US$29.1b in the same period last year to US$27.3b this quarter. Maria Pinelli says:

“As expected, there has been lower IPO activity in Asia as the number of state owned enterprises (SOEs) coming to market has diminished. The fourth quarter figures show that the US IPO market is back by deal number and rewarding companies that perform strongly. Europe has significantly increased activity in the fourth quarter, compared to the rest of the year.”

Globally, the leading sectors by capital raised in 2012 were technology (US$23.2b via 112 deals), financials (US$18.0b via 46 deals) and industrials (US$17.2b via 112 deals). Energy and materials sectors also stood out by capital raised (ranked 4th and 5th). Pipeline data suggests these sectors should continue to drive activity in 2013.

Pinelli comments:“Looking ahead to 2013, we believe that the real estate sector is also set to be more active, due to increased investor interest ahead of a possible rebound in this sector. Oil and gas also looks set to become a more dynamic sector in the US and Europe. Other sectors to watch include infrastructure and healthcare, where investment is expected to occur.”

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Preparing for listing in 2013

Businesses looking to list in 2013 should prepare early and move fast. Companies should seek early involvement from experienced non-executive directors. Strong corporate governance, a robust and supportable financial proposition will be important.

Globally, some IPO markets are better suited to an accelerated listing process than others. But wherever you plan to list, you need to ensure you have a clear, compelling story to tell investors, with the transparent financial information needed to back it up. Likewise, it’s important that you have identified and managed any risks that might slow down the listing process or derail it entirely.

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