The dominance of PE backed IPOs


  • Resurgence of private equity backed IPOs since 2012
  • More companies have undertaken dual-track processes following market uncertainties in recent years
  • PE-backed IPO pipeline remains strong

Since 2012, we have seen a resurgence of IPOs backed by private equity (PE) with over 60% of total UK IPO proceeds being raised from PE-backed investments. Similarly, for the last three years, almost half of all UK IPOs by volume have been PE-backed, originating primarily from consumer services, financial and industrial sectors.

With PE-backed IPOs increasingly contributing to IPO activity over the period from 2013 to 2015, more companies have undertaken dual-track processes, with inevitably some businesses opting for the sales route. This has been more evident from 2015 where we witnessed increased volatility, global political and economic instability, and a fall in oil prices.

Despite the slowdown in IPO activity observed during 2016, caused by the continued effect of these wider global economic and market uncertainties as well as specifically the EU referendum in the UK, the PE-backed IPO pipeline remains strong and an IPO exit route for a PE investment continues to be a viable path into 2017 and beyond.

Although there has been a slow start to IPO activity in 2017, investors will continue to back IPO candidates with an attractive valuation, a differentiated product and an equity story which is underpinned by strong performance.

Going public is an extensive transformational process for a private company, and is one that requires a change in mind-set as it learns to run for the benefit of a wider group of investors and stakeholders and prepares to meet their needs and expectations.

As a company takes steps to going public, it will be expected to:

  • Define the company’s positioning in the market and build a supportable and attractive equity story;
  • Determine the company’s tax and legal structure as soon as possible;
  • Select the right management team and the team of advisers;
  • Revise the governance structure and practices to align with market standards and practices;
  • Engage with potential investors and embark on the roadshow to sell the deal; and
  • Manage communication with the regulator to ensure required clearances are obtained.

We’ve recently contributed to the BVCA’s Guide to executing a successful IPO. It covers certain decisions and issues that come up time and time again during the IPO process and offers valuable advice and practical tips that the company and its shareholders should consider during their IPO planning process. By thinking of these early on, we believe that a company can minimise the risk of disruption to an IPO process and maximise the value of the business on exit.

You can read the full guide here.

Mark Hughes |  UK Capital Markets Leader
Profile | Email +44 (0)20 7804 3824

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