Choppy outlook for European IPO market for the last quarter of 2014

After a bumper start to the year, the traditionally quieter third quarter was indeed quiet!  So what does this mean for the rest of the year?

Our latest IPO Watch report shows that YTD 2014 European markets raised €40.3bn from 289 companies, a threefold increase on the same period in 2013.   

Here in London we saw €17.8 billion raised in the first nine months of 2014 from 109 companies, and therefore London continues to be the busiest European exchange.  Having said that, we have seen continental Europe becoming more active and benefitting from strong growth with significant IPOs each raising over €1bn in France (Altice), Spain (Merlin Properties and Applus) and Denmark (ISS). 

The story of the year so far seems to have been privatisations and large,  complex demergers.  These have mainly been seen in the financial services sector, primarily driven by regulatory requirements, and include NN Group, the Dutch insurance division spun out of ING Bank (the largest European IPO in Q3) and TSB Bank here in the UK.  This is a trend we would expect to see continuing through the year end and into early 2015.

But after such a stellar start to 2014 the third quarter did not meet our initial expectations. Nine tenths of the third quarter’s proceeds were raised in July but August and September volumes suffered significantly from both the uncertainty over the Scottish vote and a turbulent geopolitical environment.   

At the start of October we have seen a number of large deals raising over €4.3bn , including Pershing Square Holdings (€2.0bn), Rocket Internet (€1.4bn), Zalando (€0.5bn) and XXL (€0.3bn) but having said this there are still ominous signs that the rest of the year may not hold up to the expectations of the first half.   

With this in mind we would forecast that the final quarter of 2014 in Europe only reaches or just exceeds the Q4 2013 levels of €14.8 billion. We would expect London to be remain busy but not see the number of larger IPOs seen in the past, with c. 10 IPOs raising over £150m and total proceeds of c. £2 billion.

Although this would mean that total 2014 proceeds surpass those of previous years post 2007, this may disguise the fact that the last quarter levels would indicate that the IPO boom is wavering and that year-end activity does not carry on the trajectory of issuances we have seen year to date in 2014.

If you want to discuss our latest IPO Watch report further, please contact us using the details below.

Vivienne Maclachlan | Director, Capital Markets Group
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Will Creedy | Senior Manager, Capital Markets
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