Global IPO activity slows in Q3 but set for uplift in coming months

EY LLC, Kyiv, Ukraine,
Wednesday, October 9, 2013

·         Volume of US IPOs surpass 2012 total; six of Q3’s 10largest listings on US exchanges

·         Investor sentiment improving in Europe; PE a driver aslarger deals dominate

·         Deal volume in Asia up from Q2; flow of IPOs predictedfor Hong Kong

LONDON, KYIV, 9October 2013 – Global IPO activity fell in Q3 2013, withprojected activity set to reach nearly 200 deals with IPO proceeds of aroundUS$24.4b, according to EY’s latest quarterly Global IPO Trends Report. Basedon the projected Q3 2013 totals, global IPO activity is expected to be down 4%in terms of deal numbers and 47% in terms of deal value, compared to Q2 2013(206 IPOs, US$46.2b).  For the first ninemonths of 2013, around 566 IPOs are expected to raise US$94.8b. Expected dealnumbers is lower but total proceeds are expected to be higher in the sameperiod in 2012 (637 listings which raised US$91.4b).

Maria Pinelli, EY’sGlobal Vice-Chair of Strategic Growth Markets said:

“Despitea comparatively quiet third quarter – in line with historical trends of sloweractivity over the summer months – global IPO activity is expected to liftthrough the remainder of the year and into 2014. The uplift in activity willvary from region to region both in terms of timing and pace. The US market isexpected to continue its strong momentum and we expect stronger IPO activityfrom European exchanges, especially from UK and Germany, as well as from SouthEast Asian exchanges.”

US dominates activity in the Americas

Tothe end of Q3 2013, US exchanges are projected to raise US$11.8b from 65 IPOs,accounting for 33% globally in terms of number of deals and 49% by capitalraised. Health care is likely to be the most active sector by number of dealsand rank second by capital raised (21 IPOs, which raise US$2.4b ). Technologythe second most active by deal numbers and third by capital raised (12 IPOs,US$1.4b). Energy will be the most active sector by proceeds and third by dealnumber (9 IPOs, US$3.4b). Expected average deal size on US exchanges in fullQ3’13 will be approximatelyUS$182m, this compares to the average deal size ofUS$116.3m for Health care IPOs and US$119.8m for technology IPOs. The US isexpected to account for six of the largest 10 IPOs globally, including thelargest in Q3, the listing of Envision Healthcare Holdings Inc. on NYSE, whichraised US$1.1b.

Jackie Kelley,EY’s Americas IPO leader comments: 

“Inthe first three quarters of 2013 the US has surpassed its total number of IPOsfor 2012. We have seen the highest volume of health care (biotechnology andpharmaceuticals) IPOs since 2007. Average deal size continues to trend lower,because of the higher number of health care and technology IPOs that came tothe public market. Pricing remains a top concern for investors – some pricingpressure continued in Q3 but average post-IPO first day returns trended higher(14.2% for Q3 listings), outperforming the S&P 500 index and pointing tosustained activity in the US. In contrast, IPO activity in Central and SouthAmerica remains soft due in part to softer economic fundamentals, but we areseeing improvement year-on-year.”

Investor sentiment strengthening inEurope

Europeis projected to see 30 IPO with expected proceeds of US$3.0b in Q3 2013. Thiswould account for 15% globally in terms of number of deals and 13% by capitalraised. Number of deals has decreased by 29%, while capital raised has fallenby 36% compared to Q2 2013 (42 IPOs, US$4.8b). It should be noted that thelevel of capital raised in the first three quarters of 2013 (101 IPOs withexpected proceeds of US$12.9b) is up 204% on the same period in 2012 (130deals, US$4.2b). Real estate is expected to be the leading sector in Europe bycapital raised, accounting for 59% of proceeds in the quarter, driven by theregion’s two largest IPO in the quarter, Deutsche Annington Immobilien GmbH,which raised US$738m on the Frankfurt Stock Exchange and Foxtons Group plcwhich raised US$558m on London’s Main Market. While the technology sector isprojected to lead by deal numbers, accounting for 27% of IPOs on Europeanmarkets.

Dr Martin Steinbach,EY’s EMEIA IPO leader said: 

“Europeis seeing more mid-sized and large IPOs coming to the market, with privateequity-backed IPOs being a key driver, particularly in the mature economies ofthe UK and Germany,” says Steinbach. “With economic conditions stabilizing and regional debt markets steadying, marketvolatility has subsided and valuations are improving. We believe the conditionsare right for an increase in public listings in Europe in the remainder of2013.”

Asia poised for IPO upturn

Thereare 78 IPOs expected on Asian exchanges, with proceeds of US$6.4b in Q3 2013.This would account for 40% of global number of deals and 26% by capital raised.Deal number is expected to be 26% higher from Q2 2013 but capital raised fellby 59% in Q2 2013 (62 IPOs, US$15.6b). Real estate is expected to be the mostactive sector by deal number and capital raised (11 IPOs raising US$2.1b).Consumer staples (7 IPOs, US$1.5b) and Energy (9 IPOs, US$0.9b) sectors areexpected to lead by capital raised.

Ringo Choi, EY’sAsia Pacific Strategic Growth Markets leader commented:

“Theongoing suspension of new listings on mainland China exchanges has affected IPOactivity level in Asia. A drop in IPOs in Japan, following a blockbuster Q2,also weighed on total proceeds in Q3. Activity on other exchanges alsosoftened, reflecting weaker economic and market conditions, though Singaporewas one exception, with expected proceeds in Q3’13 up 39% on Q2’13 to US$1.7b,on several larger real estate offerings. However, conditions in the region areexpected to improve in the final months of 2013 and 2014 with a growing list ofcompanies planning to conduct large IPOs in Hong Kong and Japan, and when theIPO markets in Mainland China are re-open. We also expect more IPO listingsfrom emerging markets such as Thailand, Singapore, Malaysia and – to an extent– Indonesia.”

Looking forward

Maria Pinelliconcludes, “In Q4’13, global IPO volume could reach 200 – 250 listings,generating proceeds of around US$30 – 40b, in line with Q4’12 levels. Investorshave been encouraged by rising valuations but moving forward, pricing remain acritical concern. In this market, more than ever, firms need strong brand namesor earnings track records to obtain appropriate pricing and secure investorsupport.”

Clickhere todownload EY’s latest quarterly Global IPOTrends Report for extended analysis and commentary.

-ends-

Notes to editors

[1] Data sourced from Dealogic as at 19^thSeptember. Globally, in Q3’13 (as at 19^th September), there havebeen 160 deals which raised US$18.2b. An additional 37 deals are scheduledbefore end of September which should raise an additional US$6.1b if successful.Our projected numbers are the sum of Q3’13 IPO activity as of 19^thSeptember and the additional deals.

Analysisincluded on this press release are based on projected numbers.

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