IPOs outlook 2015…sunny with stormy clouds on the horizon?

“2014 - the IPO strikes back

With 375 companies raising almost €50bn in Europe, 2014 was undeniably a strong year for European IPOs and the most successful year since 2007! London hosted 137 companies raising €19.4bn, a 35% increase on 2013, including a 70% increase in proceeds raised on AIM.

Quarterly European IPO activity

Despite two thirds of European IPOs outperforming equity indices last year, it was not a walk in the park for some deals, particularly as the year progressed. 68% of total money across Europe was raised before the summer break and the market cooled down in second half. There were a number of pulled and postponed deals in the last part of the year, especially in London where the second half only contributed 18% of the annual proceeds compared to 41% in continental Europe.

Trends to watch out for in 2015
January is the time of year to make predictions. Looking into my crystal ball, the outlook for 2015 is:

  • Sensitivity to macro events: Heading into 2015 we continue to see a strong level of preparatory activity by companies across Europe that are planning to IPO. However the likelihood of floats getting away is very much dependent on macro events  – such as falling oil prices, deflationary concerns impacting European economies, as well as continued geopolitical uncertainty.

  • Sliding IPO windows: The UK election at the beginning of May will effectively condense the IPO window for the first half of the year – with certain candidates likely to delay plans until post-election when there is more clarity over the political landscape. IPOs in continental Europe should be less affected and will continue to ramp up until the summer break.

  • Dominance of private equity exits: Private equity backed IPOs hit record levels in 2014, representing 53% of European proceeds (1). I believe PE exits will continue this trend in 2015, albeit that an increasing number will be running dual track processes thereby driving M&A as well as IPO activity.

  • Continuing mid-cap activity: In 2014 mid-cap activity dominated the markets in London where the last jumbo IPO was Royal Mail’s €2.3bn privatisation in October 2013. Activity on AIM has picked up significantly in 2014 and this will lead to an increasing proportion of mid-cap floats.

  • Evolving cross-border dynamics: In 2014, 20 European companies listed in the US, raising c.€4.4bn. I anticipate the US markets will continue to lure tech and bio tech companies this year. On this side of the pond, London inbounds only accounted for 26% of proceeds, well below the 39% ten year average. This is likely to pick up in the medium term as we see new activity in particular from Middle Eastern and African issuers.

 (1) Threshold of $50m applied to PE analysis

Look out for our upcoming webcast to hear more about current IPO market conditions and the outlook for 2015. If you want to discuss this article further please get in touch using the contact details below.

Mark Hughes | Partner
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