EY Global IPO Trends
Asia-Pacific tops the leaderboard
Beyond the huge uplift to IPO activity in Asia-Pacific from the re-opening of mainland Chinese exchanges, markets elsewhere in the region posted solid levels of new listings in 2014 Q1. With a positive IPO outlook in many countries, Asia-Pacific is likely to continue to dominate the IPO landscape in the coming quarter and beyond.
Investors eye Japanese companies
After a solid 2013, IPO activity on Japanese exchanges has continued at a good pace in 2014 Q1 with 15 IPOs raising US$4.9b compared to 16 IPOs which raised US$2.0b in 2013 Q1, many of which posted first-day gains. The Nikkei 225 is trending higher, with increased share prices reflecting investors' expectations of companies' profits.
The number of pre-IPO companies continues to increase and we estimate around 70 to 80 IPOs in Japan in total in 2014, including the listing of PE-backed Seibu Railway in 2014 Q2, which is expected have significant IPO proceeds.
Temporary lull in Oceania
After a significant pick-up in activity in Australia in 2013 Q4, when 24 IPOs which raised US$3.6b were priced after a five-year IPO drought, 2014 Q1 saw six new listings raising US$874m in total. However, this is traditionally a quiet quarter, and activity is expected to pick up in April, leading to total of up to AUS$8b of IPOs to be priced in the first six months of this year. New Zealand companies, eager to access local and Australian investors, are expected to among those coming to market in 2014.
Steady activity in Southeast Asia
Southeast Asia IPOs are gathering momentum, notwithstanding the continuing concerns over emerging markets. IPO activity in Indonesia, Singapore, Thailand and Malaysia remained on a par with 2013 Q1, with seven deals reported in Indonesia, four each in Singapore and Thailand, and one in Malaysia in 2014 Q1. These countries are expected to be the ones to watch in Southeast Asia through the remainder of 2014, although the federal election in Indonesia may slow capital raising activities.
Asian private equity lags other markets
Although Asia-Pacific led the way in terms of total number of IPOs in 2014 Q1, only 12% of the new listings were PE- or VC- backed. EY’s recent Global private equity watch 2014 report mentioned IPOs have become a less favored option for PE exits in Asia-Pacific in 2013, partly because of the closest Mainland China IPO market, but also due to the economic deceleration in some areas of the region, which affected capital market appetite.
While the reopening of the IPO market in China may see more PE exits via IPOs than in this region in 2014, there has been a noticeable shift in PE investors’ views on exit routes in 2013. Trade sales are now seen as an attractive option as corporations look to improve their strategic position in the region and local trade buyers emerge.
As the Asia-Pacific markets mature, secondary buyouts are also becoming a more viable exit route for PE funds.