IPOs outlook 2015…sunny with stormy clouds on the horizon?
January 14, 2015
“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.
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
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