(As originally published on LinkedIn, 10 July 2017)
IPOs are making a comeback in 2017
By: Bill Demers, EY Canada’s IPO leader
We’re crossing the mid-year point and things appear to be slowing down for the summer, but the IPO market is only heating up. Globally, the first half of the year saw IPO activity picking up in all regions. Some 772 IPOs raising US$83.4 billion made it the most active first half of a year we’ve seen globally since 2007. This pick up was led in part by record-high market gains in many bull regions and a brightened global outlook.
And this momentum is echoed greatly in Canada, too. Pulling numbers from EY’s Global IPO Trends: Q2 2017 report, the Toronto Stock Exchange and TSX Venture Exchange saw 11 deals – four in Q1 and seven in Q2 – that raised a total of US$1.8 billion. This means we’ve already more than doubled the number of IPOs that we saw in all of 2016.We’re off to a positive start, to say the least.
Of these eleven Canadian IPOs, 4 issuers listed outside the home country; two as cross-border IPOs worth US$354 million. This is particularly interesting as the global landscape changes, and things like regulatory requirements, financing opportunities and organizational fit provide different benefits for different sectors. Companies are looking for markets where people can best understand and evaluate its business model.
Across the Americas, technology and energy sectors are expected to our biggest players for the duration of 2017. It’s no surprise then that Canada’s energy sector saw the seventh largest IPO globally and second largest IPO in the Americas in Q2 2017, raising US$1.3 billion. We’re anticipating more deals like this to come as companies start to enter the public markets keen to capitalize on strong investor appetites.
Another thing we’re seeing in Canada is continued use of the dual-track approach. We saw the popularity of this tactic increase back in 2014 due to volatility in the market. The dual-track approach allows companies to pursue both an IPO and private equity deal simultaneously. The benefit is it gives exposure to institutional shareholders in an IPO, which may make other bidders – through the M&A stream – consider making an offer, ultimately maximizing the exit proceeds.
Lastly, we’re seeing many of the investments made by private equity and venture capitals during the 2007-2008 recession are coming to the end of their holding period. This means we’ll be expecting more companies looking to a liquidity event of some sort in the near future.
As threats to the stability of the global economy ease and investors regain confidence, the outlook for the 2017 Canadian IPO market is optimistic. We’ve already seen a great start to the year, and we expect this momentum to continue. Companies should remember though, that with heightened optimism comes increased competition. With that, companies considering an IPO exit strategy will have to build out and nurture strong pipelines, and take the time to pursue investors who complement the business. They’ll also have to be flexible in timing and pricing, and prepare early to complete the IPO quickly in narrow windows. Companies who can act quickly while thinking long-term will be best suited for a successful IPO.