Stronger global markets and macroeconomic conditions drive an improved IPO outlook for 2013March 26, 2013
Global IPO activity is up 1% by capital raised and down 42% by deal volume so far in Q1’13 (118 IPOs, raising US$18.2b in proceeds), compared to Q1 2012 (204 IPOs raising US$18.0b in proceeds) according to Ernst & Young’s Global IPO update.
Ernst & Young’s Global IPO pipeline analysis also indicates an additional 31 IPOs are scheduled before the quarter’s end and should raise an additional US$5b.
- Q1 Global IPO capital raised likely to be 30% higher than in 2012
- US most active region while Asia IPO activity drops by almost half
- Europe shows positive momentum in some countries
- Real estate sector leading activity globally
The largest deal so far this quarter was the listing of a US pharmaceutical business (carve-out), Zoetis Inc for US$2.6b. Globally, there were five IPOs raising over US$1b, compared to only one in Q1’12 and nine in Q4’12.
Average deal size increased 75% to US$154m, compared to US$88.2m in Q1’12. Two IPOs have been postponed and 15 withdrawn in Q1’13, compared to two and 51 IPOs respectively for Q1’12.
Maria Pinelli, Ernst & Young’s Global Strategic Growth Markets Leader comments:
“Q1’13 posted strong results compared to activity this time last year. The pipeline is robust and we are aware of a minimum of 300 new companies globally that are actively preparing to list in 2013. In addition, institutional investors have returned to the IPO markets as an asset class, with more than 82% investing in IPOs in 2012, compared to only 18% who last invested in 2010 and 2011, as evidenced in a recent Ernst & Young’s study of institutional investors.”
US market very positive
In Q1’13, US stock exchanges have so far raised US$6.7b from 24 IPOs, accounting for 37% of global capital raised this quarter and making the US the most active region globally. Capital raised was up 4% compared to Q1’12 (US$6.4b from 41 IPOs).
If the additional US$1.2b via eight IPOs in the pipeline for the remainder of March is successful, the US will be on par with Q4’12 (US$8.9b from 33 deals).
In March, the Dow Jones Industrial Average reached its highest point since October 2007. With macroeconomic conditions also improving, this means that market sentiment in the US is very positive.
Strong momentum is expected for the US IPO market for the rest of 2013, provided that stable macroeconomic conditions exist: a concern for investors. Real estate, life sciences, technology and oil and gas will lead the US IPO markets and these industry sectors account for more than 50% of the US IPO pipeline.
Conditions in Europe improving
In Q1’13, European stock exchanges have so far raised US$2.7b from 15 IPOs (accounting for 15% of global capital raised this quarter). Europe contributed the second largest IPO globally, the real estate company, LEG Immobilien AG from Germany which raised US$1.5b.
Ernst & Young’s Global IPO pipeline analysis indicates there are an additional 11 IPOs with expected proceeds of US$2.0b to price before the end of March. If successful, this will increase capital raised by 68% compared to Q1’12 (39 deals raised US$2.9b).
IPO activity in Germany, UK and the Nordics is particularly active. Other parts of Europe are not expected to recover until the second half of 2013.
Maria Pinelli comments:
“Cash strapped governments will likely seek capital through initial public offerings of state-owned enterprises in 2013. In addition, new government initiatives to foster market access for fast-growth firms and entrepreneurs will also be important for the remainder of 2013.”
“This combination of a supportive regulatory environment, together with strengthening market indices, mean conditions has improved significantly for the region. However, the Eurozone’s political and economic difficulties are casting a shadow across the capital markets.”
Asia off to a slow start
Deal volumes have reduced dramatically in Asia in Q1’13. Asian stock exchanges raised just US$5.1b in 58 IPOs, accounting for 28% of global capital raised this quarter. Capital raised was down 38% compared to Q1’12 (US$8.4b raised, from 97 deals) and a 40% drop by deal number.
The decline is due to a halt in listings on Chinese exchanges since November 2012. The new proposal for additional scrutiny of potential listings when markets reopen is likely to slow activity. There were no Chinese IPOs on mainland China exchanges in Q1’13, and a slight reduction in deal volume in Hong Kong (US$1b, from 9 deals) in Q1’13 compared to Q1’12 (US$1.4b via 14 deals).
The IPO markets in Singapore and Japan fared better. Stock exchanges in these markets accounted for 62% of capital raised in the region in Q1’13. Interest in REITs (real estate investment trusts) remained particularly strong.
Several large REIT listings, including the US$1.4b Mapletree Greater China Commercial Trust on Singapore exchange and the US$1.1b Nippon Prologis in Japan, were dominant. Attractive yields and tightening market conditions in commercial real estate drove their successful IPO performance.
Maria Pinelli says:
“The Asian market will be lower in the first half of 2013, but is expected to be more active in the latter half of the year with entrepreneurial IPO activity. We are seeing a reduction in the number of state-owned enterprises in the IPO markets from China; other markets within Asia have been more active in state-owned IPOs.”
IPOs by sectors
Real estate dominates the sector picture in terms of funds raised – accounting for over a third (34%) of global IPO activity (US$6.2b) and by number of deals (15%, 18 deals). Reflecting the Zoetis IPO, healthcare (15%, US$2.8b) and industrials (9%, US$1.6b) were also active by capital raised. In terms of number of deals, industrials ranked second (14%, 16 deals) followed by consumer products (10%, 12 deals).
“Real estate IPOs will dominate globally in Q1’13. We also expect life sciences, technology and oil and gas to lead the US IPO markets. In Asian markets we will continue to see materials, industrials and financial services IPOs coming to market. In Europe, real estate and financial services will dominate in terms of the number of deals,” concludes Pinelli.
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