Private Equity, Public Exits Q1 2014 digital edition
Robust equities markets and strong investor sentiment led to the most active first quarter for global IPOs in three years. Private equity is taking advantage of the strong market to list firms acquired over the last several years, particularly from 2006-07.
The year is young, but the industry is on pace to exceed the record activity seen in 2013 for PE-backed IPOs (US$58.5b raised across 187 deals). Through March, companies backed by PE firms priced 46 IPOs raising US$17.4b, more than double the amount raised in Q1 2013.
The strong market has emboldened others to join the queue. During the last three months, the PE-backed IPO pipeline has more than doubled. Barring exogenous macro shocks, the industry should see the most accommodative listing environment since the crisis.
PE-backed IPO proceeds increase dramatically across all regions
The comeback of the Euro market continues. EMEA saw the largest year-over-year gains (121%) during Q1 2014, with PE firms raising US$7.4b across 15 IPOs.
The Americas market was also very strong. IPOs from the region raised US$8.0b in the first quarter, nearly twice the amount from Q1 2013.
The Asia-Pacific market was muted in 2013 due to the regulatory moratorium (now ended) on mainland China IPOs. Although there were only six deals in the Asia-Pacific region in Q1 2014, total value increased by more than 200% compared to Q1 2013.
China’s mainland markets reopen to new listings
With the IPO window effectively closed throughout 2013, firms had to decide whether to wait out the shutdown or pursue alternative exits such as trade sales and secondary buyouts.
Although just one PE-backed deal has listed since the 14-month moratorium ended in January, there is a significant pipeline of PE portfolio companies expected to launch in coming months.
With China’s regulatory agencies now actively pursuing market-driven reforms designed to streamline the listing process, mainland venues should become even more accommodative to PE-backed offerings.
Two-thirds of deals close Q1 above their offer price
PE-backed deals that listed during the quarter posted strong performance. Two-thirds of PE-backed IPOs closed at or above their offer price on 31 March.
On a weighted average basis, deals increased 5.9% on their first day of trading and rose 7.0% through the end of the quarter.
Ares joins ranks of public PE firms
With its 22 April pricing, Ares Management became the first PE firm in nearly two years to go public.
Ares’ listing could entice others to follow. Public listing makes sense only for a relatively small population of firms, but there is IPO speculation around several high-profile private firms.
New filings explode, doubling PE-backed pipeline
During Q1 2014, 89 PE-backed firms filed for new IPOs, boosting the number of companies in the pipeline to more than 100. In terms of value, first-quarter activity nearly doubled the pipeline to more than US$27b.
There is also a significant shadow pipeline with firms that could pursue listings as conditions permit. According to Pitchbook, PE firms currently hold more than 12,000 companies globally. For many, an IPO could be the most attractive path to liquidity.