www.pwc.com
What does the future hold?
PE buyers continue to find raising debt for secondary buyouts
challenging and trade sales negotiations continue to be
notoriously long and drawn out. Both these factors contribute
to an IPO exit becoming a viable and more attractive option.
2013 has been characterised by increases in the major indices
and the lowest volatility seen since 2007. This level of stability
and the equity market remaining open for larger periods of
time has led to many PE backed companies running a dual –
track process, executing both an IPO and sale process together.
This can provide optionality and also establish price
expectation amongst sellers, buyers and investors alike.
US investors have generally been more accepting of higher
leveraged assets, a characteristic of the boom times of the
2007 when many PE houses raised large amounts of debt to
fund acquisitions with very small equity stakes.
Our 2014 outlook
The market in Europe has evolved significantly in the last
five years. As cross border transactions in Europe have
significantly declined, PE backed companies coming to
market are providing new investment opportunities for
hungry investors.
Although the US has continued to be an attractive market
for PE backed companies over the last 10 years, Europe is
now a viable alternative.
The healthy PE backed IPO pipeline in the US and Europe
continues to show that this trend is likely to continue
throughout 2014.
The return of
private equity
backed IPOs in
Europe
Perhaps the European market will become more accepting of
this as our markets and investors become more globalised,
which can only lead to similarities in risk appetite increasing
cross border.
Methodology
• The dataset consists of all new primary market listings in the US and on Europe’s principal markets and market
segments (including exchanges in the EU member states plus Switzerland and Norway).
• Our survey is based on data extracted from Dealogic on IPOs raising over $50m in proceeds. We have excluded closed
end funds, Finance-Investment Management, Finance-Acquisitions/Restructurings, Finance Capital Pool Companies,
demutualisations, restructurings, SPACS, SPVs, REITs, Oil and Gas Royalty trusts and OTC listings.
• Cross-border IPOs and related proceeds are allocated to the primary exchange. Movements between markets on the
same exchange, re-admissions, reverse takeovers and greenshoe offerings are excluded. ICB industry classification is
based on Bloomberg. Certain figures in this report are subject to rounding adjustments and all values in millions have
been rounded to the nearest million.
Contacts
Capital markets
About the IPO Centre
Martin Coenen
Partner
+31 (0) 88 792 50 23
[email protected]
Our IPO Centre was created to make it easier for you to
understand what you need to know and do to complete an IPO.
We bring together our sector expertise and our knowledge of
local and international capital markets to help you evaluate
the pros and cons of IPO, take you through the flotation
process and prepare your business for life as a public
company, regardless of the market you choose to list on.
©2014 PricewaterhouseCoopers Accountants N.V. (KvK 34180285). All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of
which is a separate legal entity. Please see www.pwc.com/structure for further details.
An IPO Centre publication
March 2014
An overview of the European IPO market
(2010 – 2013)
As European markets pick up and volatility
stabilises, an IPO exit route for a private equity
(PE) investment is now a viable option.
Historically PE backed companies seeking IPO had
been viewed with distrust by investors. The
European market has a long memory and the high
leverage and poor post IPO performance of some
PE backed IPOs had coloured investor sentiment.
Proportion of PE backed IPOs US and Europe (2003 – 2013)
70%
60%
50%
40%
30%
By contrast the US markets have remained
consistently open to PE backed IPOs, with 50% of all
IPOs since 2010 being PE backed. In Europe,
PE backed IPOs have been less well represented and
– until 2013 PE backed floats had an average
accounted for less than 25% of all IPOs. In 2013 this
is now 48%.
20%
10%
0%
2003
2004
2005
2006
2007
2008
EU
2009
2010
2011
2012
2013
USA
2003-2012
2010-2012
2013
US
50%
58%
50%
Europe
24%
24%
48%
Float size decreasing and post IPO share price
performance is improving
Float size
Percentage free float at IPO (2010 – 2013)
Between 2010 to 2013 US PE IPOs have had
smaller free float levels, significantly lower than
European offerings at the point of IPO.
70%
US
60%
Europe
52%
50%
40%
30%
55%
45%
37%
33%
33%
28%
32%
24%
25%
41%
39%
36%
30% 28%
European free floats have been influenced by
regulatory minimums for index inclusion and
market eligibility as well as by the markets’
perception of acceptable levels of post IPO debt
leverage. Traditionally the US market has been
more accepting of higher levels of leverage than
the European market. Consequently there has
been less pressure in the US to raise capital at IPO
to pay down debt, resulting in lower initial sell
downs.
29%
20%
10%
0%
2010
2011
2012
2013
non PE
2010
2011
2012
2013
PE
Source: Dealogic as of 31.12.2013, PwC analysis
The US market has also seen smaller initial free
floats, with frequent sell downs once the stock has
been established. Europe is now increasingly
following this model.
About half of all US and European
IPOs in 2013 were PE backed
Source: Dealogic as of 31.12.2013, PwC analysis
PE trends in Europe 2013
In 2013, the IPO market in Europe has evolved and
48% of all IPOs were PE backed, a massive jump
compared to 2012.
It’s still early days, perhaps too early to tell if this
indicates a real change in how investors perceive PE
backed IPOs, but it does indicate a positive shift in
sentiment. As has always been the case, investors
are interested in good assets and cashflows coupled
with reasonable pricing and PE backed IPOs have
shown that they can provide this.
Of the €68.9 billion raised (2010-2013) from
European IPOs, €21.4 billion (31%) was from PE
backed companies floating. This rises to 57% or
€11.4 billion raised in 2013 and PE backed
businesses account for 24 of the 50 IPOs in 2013.
Pricing
European IPOs (non-PE vs PE)
Number of issuers
Non-PE PE
Proceeds (€bn)
% non-PE % PE Non-PE
PE
% non-PE % PE
2010
42
14
75%
25%
14.7
7.0
68%
32%
2011
24
10
71%
29%
16.3
2.0
89%
11%
2012
18
3
86%
14%
7.8
1.0
88%
12%
2013
26
24
52%
48%
8.7
11.4
43%
57%
Total
110
51
68%
32%
47.5
21.4
69%
31%
Source: Dealogic as of 31.12.2013, PwC analysis
PE backed companies have sought listings on
three main exchanges – London, Frankfurt and
Copenhagen. Of the 51 PE backed companies
seeking an IPO in Europe since 2010, 32 listed on
the following venues:
2013 has seen a significant uptick in the
proportion of PE IPO compared to previous
years, with 24 deals raising €11.4bn
• 18 IPOs were in London (raising €7.6 billion);
• 11 in Frankfurt (raising €4.0 billion); and
5
0
0
ite
til
C
lth
ea
U
ar
n
io
at
H
un
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co
m
m
ch
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at
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fo
rm
ic
no
l
er
ia
og
y
ls
ls
at
M
st
ria
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In
du
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PE IPO proceeds
Source: Dealogic as of 31.12.2013, PwC analysis
70%
US
60%
Europe
50%
40%
30%
20%
US PE backed IPOs, however, have historically
enjoyed a noticeable ‘day one pop’ as there is a
tendency for IPOs to be ‘priced to go’. This
approach, coupled with improved optimism about
the US economy during the second half of 2013
and a greater technology focus, has led to post
IPO price performance being consistently better
in the US when compared to performance on the
European exchanges by new entrants.
10%
0%
1 Day
1 Month
3 Months
6 Months
1 Year
31-Dec-13
non PE
1 Day
1 Month
3 Months
6 Months
1 Year
PE
Source: Dealogic as of 31.12.2013, PwC analysis
Of the top 20 European IPOs by share price
performance at 31 December 2013, 8 were PE
backed whereas only one PE backed company
appears on the list of the 20 worst performing.
Many PE houses and management undertake a
secondary offering as they come out of their lock
up periods. This upward trajectory in pricing is
clearly beneficial to the sellers in the after-market
– with secondary offerings sometimes being the
same size if not larger than the original offering.
s
2
e
10
s
4
er
Billions (€)
15
Fi
In 2014, we expect this to continue, especially
retail IPOs in the first half of the year as
companies come to market off the back of strong
Christmas trading results.
6
on
No one industry or sector stands out, and we are
seeing around four deals per segment in the
period. However, consumer goods and financials
do have a slight lead in relation to proceeds and
number of IPOs.
20
C
Industry focus
8
Number of IPOs
European PE IPOs by industry (2010 – 2013)
• 3 in Copenhagen (raising €2.6 billion).
In 2013 the majority of PE backed companies
listing in Europe have been priced near the top of
their offer range. In day one of trading, share
prices of European PE backed IPOs have
remained relatively stable as initial pricing was
perceived to be fair market value.
IPO performance as percentage of the offer price in the US and
Europe (IPOs in 2010 – 2013)
PE IPOs
In both Europe and the US PE backed floats have
consistently outperformed non-PE companies and
the market
31-Dec-13