EY Global IPO Trends Report

Transcription

1 EY Global IPO Trends Report Q3 03 Contacts: Maria Pinelli Global IPO Leader Jacqueline Kelley Americas IPO Leader Ringo Choi Dr. Martin Steinbach EMEIA IPO Leader Shinichiro Suzuki Japan IPO Leader Welcome Welcome to the new-look quarterly EY Global IPO Trends report, which provides extensive commentary on listings activity across the world and analysis of key drivers from EY s Global IPO network. Despite a comparatively quiet third quarter in line with historical trends of slower activity over the months of July through September we expect global IPO activity to lift through the remainder of the year and into 0. The uplift in activity could vary from region to region both in terms of timing and pace. Average deal size continues to trend lower, because of the high number of health care and technology IPOs that came to the public markets. Pricing remains a top concern for softer economic fundamentals, but we are seeing improvement year-on-year. Europe is seeing more mid-sized and large IPOs, with private equity a key driver, particularly receding, market volatility has subsided and valuations are improving. The conditions are The ongoing suspension of new listings on mainland China exchanges has affected IPO economic and market conditions. However, conditions in the region are expected to improve such as Thailand, Singapore, Malaysia and to an extent Indonesia. We hope that the analysis and perspectives contained in this report will be of use to all participants in the capital markets but, should you require further insight, please contact me or the EY IPO Leader in your region. Maria Pinelli Global Vice Chair Strategic Growth Markets EY

2 Global IPO activity Q3 analysis Global IPO activity softer in Q3 3, though the underlying improving trend is intact Global IPO activity is projected to reach deals with IPO expected to be down % in terms of deal numbers and % activity is projected to be slightly higher by deal numbers but Quarterly IPO deals by region* Number of deals Q Q Q3 Q Q 3 Q 3 Q3 3 3 Source: Dealogic. 03 Global IPO activity by quarter 8 8 Total Number of deals 0 Capital raised... Average deal size % Increase / decrease. vs 0 Number of deals -.% -.% Capital raised -.% expected IPOs by end of September.. Source: Dealogic. 8 8 Quarterly IPO proceeds by region* Proceeds (US$m) 0,000,000 0,000 3,000 30,000,000 0,000,000 0,000, ,, 3,00,88,,0,3,0 3,0,,88,0,,8,,0,,8,0,3,80 3,333,0,,0 3, 8,3 Q Q Q3 Q Q 3 Q 3 Q3 3 Source: Dealogic. a story of two halves. In July and August, signs of improving macroeconomic conditions, particularly in the developed economies, coupled with ultra-low interest rates and new indications from major central banks that they would keep monetary conditions loose for longer, were all supportive of public listings. This combination saw market volatility decline.% at the start of August. Equity indices and IPO activity gathered steam concurrently, with the S&P 00 hitting its months of 0. investor concern grew on impending monetary tightening soon begin to taper its asset purchase program, potentially driving volatility higher and putting risk assets, especially in the emerging markets, under pressure. Following hints concerned about the economy. In the near term there may be some upside, particular in the emerging markets, from where in search of higher yields. However, the expectation is that a reduction in stimulus will begin at some point this year.

3 Signs of softer economic prospects in key emerging markets, including India and Brazil, alongside new global geopolitical concerns in Syria and Turkey, did not help investor sentiment. in September 0. underlying improving trend in global IPO activity is intact. price, was at.% Q3 3 Top 0 global IPOs by capital raised Issuer Name Sector Capital raised Envision Healthcare Holdings Inc American Homes Frank's International NV Deutsche Annington Immobilien GmbH Exchange(s) Health care,0. New York (NYSE) New York (NYSE) Energy.0 New York (NYSE) Deutsche Borse Z Energy Ltd Energy.0 Australia (ASX) Energy. New York (NYSE) QEP Midstream Partners LP Energy New York (NYSE). Singapore (SGX) Singapore (SGX) Phillips Partners LP Energy New York (NYSE) Source: Dealogic. Q3 3 global IPOs by sector Sector Number of deals % of global deal number Capital raised % of global capital raised Energy,0. 0.%,..0% Health care.%.% Industrials.%.% Technology.% Financials 0.0%.%.0%.% Media and entertainment. Consumer staples.0% Materials.%..% Consumer products and services. 0.% Telecommunications. 0.% Global total % 8,. 00.0% Source: Dealogic. September, according to Dealogic data. 3

4 Outlook for Q An improving global economic outlook is supportive for IPO activity in Q 3, although monetary policy changes may heighten uncertainty GDP growth in the major developed economies in the coming at a solid pace, and recent export and manufacturing indicators production and export data are stronger. Japan has also bounced back, reporting solid GDP gains and rising trade and manufacturing. The OECD composite leading indicator rose to 00. on its latest reading, pushing further above its long-term average level of 00.0, to its highest level since April 0. The outlook for emerging markets is softer. The OECD leading indicator suggests slowing momentum in major emerging economies, including Brazil and India. However, other leading result, weaker performance in emerging economies in the nearterm should not derail the better overall global outlook. OECD Leading indicator growth vs. number of IPOs Number of IPOs Source: OECD.stat, Dealogic. Q 0 Q3 0 Q 0 Q Q Q3 Q Q Q Number of IPOs Q3 Q Q 3 Q 3 Q3 3 Q 3 Q OECD + Major Emerging Economies Leading Indicator Investors have been encouraged by rising valuations, but pricing remain a critical concern. More than ever, pre-ipo companies need strong brand names or earnings track records to obtain appropriate pricing and secure investor Maria Pinelli Global Vice Chair, Strategic Growth Markets, EY Year-on-year growth Stronger performance in equities in many developed % Equity market returns year-to-date 0% 0% 30% 0% 0% 0% -0% -0% % % Source: S&P Capital IQ. % % % % % % % % 3% % 0 YTD return 03 YTD return 0% % The combination of these factors is supportive for equity outlook for global monetary conditions. Extremely loose monetary policy at the world s major central banks is expected to stay in place for several quarters yet. The prospect of the program potentially before the end of the year does not represent a step-change in policy. Tapering is expected to be very gradual, and the cautious tone of communications from doing whatever is necessary to support economic growth. Crucially, recent economic data, while improving, is not expected to prompt a change in thinking from central banks on interest rates. Jobs growth and other fundamentals are still have some breathing room. As a result, interest rates are expected to remain at record lows for the foreseeable future. This combination of better growth and easy monetary conditions is ultimately supportive for equity capital markets. Conditions could remain volatile near-term, until investors have more clarity on what tapering will actually look like. Emerging markets in particular could feel the pressure, as investors process the implications for their portfolios of a wind down in monetary stimulus. However, barring a large deviation from this outlook, market volatility is not expected to increase. 0% -%

5 IPO activity should lift in Q 3 In this environment, global IPO activity is expected to lift in the still-loose global monetary policy settings and steadying market volatility suggest a wider window for new listings in the coming This would be in line with Q levels, with policy uncertainty suggesting the path to recovery in the IPO markets may not be a smooth one, despite a better economic backdrop. From region to region, the recovery could be uneven both in terms of timing and pace. In particular, the continued prospect monetary conditions could drive some divergence in IPO There is further potential downside for emerging markets in the coming months, though this is not expected to be substantial given the recent sell-off. Slower economic growth in some emerging markets, alongside the prospect of central bank rate rises in order to stabilize exchange rates, would be unfavorable in institutional investors appetite for new listings. At the same time, improving economic conditions and investor interest in track records to obtain appropriate pricing and secure investor and operator of business-to-business online market-place Alibaba are expected later this year or in 0. global market. PE-backed offerings slowed to deals in the that suggest PE-backed deals should rise. Filings are on an companies waiting to go public. As at 0 September, there are companies in active registration, which could raise also been minimal this year. In addition, the solid aftermarket performance of recent listings is an important catalyst for PE investors to take companies public. The large overhang of companies acquired during pre-recession years should also Financial sponsored backed vs Corporate IPO deals 00% 0% 80% 0% 0% 0% 0% 30% 0% 0% 0% % % Source: Dealogic. 8% 8% 8% % % % % 8% % % Financial sponsored Corporate deals 8% % Q Q Q3 Q Q 3 Q 3 Q3 3 PE-backed IPOs should also gain pace Global PE-backed IPOs by quarter * market trends closely in recent quarters. This is expected to level of volatility in the equity market holds steady. PE-backed deals were an important part of the rising trend in above their expected ranges. Number of IPOs Q 0 Q 0 Q3 0 Q 0 Q Q * Based on priced IPOs as of September. Source: Dealogic. 3 0 Q3 Q Q Q Q3 Q 3 0 Q 3 Q 3 Q3 3

6 Industry analysis drive activity in Q 3 IPO activity in terms of volume of activity and proceeds global total capital raised. The largest deal worldwide in technology sectors were the next most active sectors from a deal volume and value perspective. balanced year for global IPO activity, with a diverse mix of sectors likely to continue to drive new listings. The global IPO pending, according to Dealogic data. Still, some sectors are set to lead total activity higher in higher market volatility drove increased postponements and withdrawals. Several large listings are rumored heading into the new quarter, though the timing of these deals is unclear. Twitter Inc., for example, has announced plans for an IPO listing on September. At the same time, conditions sector has experienced solid improvement in earnings in recent months, mainly in, where the backlog quality and slowing writedowns suggest the sector should continue to trend higher, which is supportive for new offerings. attractive yields, should continue to support successful new listings. In Europe however, there are not as many large targets going forward. Yield plays should also drive another active quarter for utilities and energy master limited partnerships. There was a short-term correction mid-year, with uncertainty withdrawals higher. However, with central bank rates set to hold steady in the coming months, irrespective of any tapering in quantitative easing programs, investor demand for income should persist for some months yet. Financial* Q 3 Q 3 Q3 3 Financial by number of deals Financial by capital raised (US$m) $,3 $, $88 $ $, 3 $3 $,8,3 8 8 $,330 $, $ 3 $ $ $330 Industrial* Q 3 Q 3 Q3 3 Industrial by number of deals Industrial by capital raised (US$m) $,03 $8,0 $,38 $3 $8 $30 $0 $0 $,3 $, Source: Dealogic. $,0 $ $3 $ $

7 Real estate* Q 3 Q 3 Q3 3 Real estate by number of deals 3 0 Energy* Q 3 Q 3 Q3 3 Energy by number of deals 0 3 Real estate by capital raised (US$m) $, $,3 $, Energy by capital raised (US$m) $,083 $, $,0 $, $, $,0 $ $,0 $, $,0 $,30 $30 $3 $, $8 $ $0 $38 $ $0 $,8 $, $, $,30 $ $3, Technology* Q 3 Q 3 Q3 3 Technology by number of deals 0 Health care* Q 3 Q 3 Q3 3 Health care by number of deals Technology by capital raised (US$m) $, $, $ Health care by capital raised (US$m) $3,08 $3,30 $,30 $ $0 $3 $0 $8 $8 $ $3 $0 $ $0 $ $8 $3 $,3 $3 $,8 $,0 $,03 Source: Dealogic.

8 Regional analysis US continues its strong momentum and stronger IPO activity from Hong Kong and South East The Americas Strong US activity in Q3 with further upswing forecast, while conditions remain challenging in number of deals and % by capital raised. already surpassed last year s total with completed IPOs of 0 with both the second and third quarter deal volumes greater this year than during the same periods last year. By From a sector perspective, health care is expected to be the most active sector by number of deals and ranks second by capital health care sector, such as biotechnology and pharmaceutical same time period of.0%. The technology sector is expected to be the second most active of the higher number of health care and technology IPOs that Despite encouraging levels of activity and investor interest, pricing remains a top concern for investors. Some pressure on within range, almost 0% were at the lower end is currently trading at around 0 times reported earnings, close to the highest level since April 00. This combination of attractive valuations and the solid aftermarket performance industries. Looking ahead, real estate IPOs are expected to continue to cross-border listings a potentially important contributor to new September was an important barometer of investor appetite for social media listings and the outcome of the pending listing further evidence of the level of investor interest. We also expect to see IPOs in big data and cloud computing sub-sectors over substantial contributor to IPO activity. investor sentiment across the Americas region is mixed. IPO activity in selected parts of remain and historically slower activity during the summer months. in 0, due to improvement in listing activity from Brazil and Mexico exchanges. Total Number of deals 0 Capital raised. Average deal size % Increase / decrease 0.. vs 0 Number of deals % % Capital raised -% -% % expected IPOs by end of September. Source: Dealogic.

9 slowed. After the world s largest IPO this year (BB Seguridade have slowed dramatically with just one IPO since. Slower market conditions forced two big companies, Votorantim Cimentos SA IPO activity on Mexican Stock Exchange has trended higher over the last two years compared to previous high level in 00 Total Number of deals Capital raised.... Average deal size % Increase / decrease vs 0 Number of deals -% % Capital raised % % expected IPOs by end of September.. Source: Dealogic. IPOs in 0. Pricing a top concern for investors came under some pressure higher and outperformed the S&P 00 index. This points to sustained activity in Jacqueline Kelley Americas IPO Leader, EY Positive signals in mature economies of Europe; PE a driver as larger deals dominate IPO sentiment across Europe is improving. The region is period in 0. However, average deal size dropped slightly months. Germany where valuations are comparatively high and volatility levels have subsided. European stock markets including the program, all major European indices climbed again. largest European IPO was German real estate group Deutsche Market. Conversely, in the emerging markets of Middle East and Africa, smaller deals are prevailing. Middle East exchanges saw 0 be attributed to the slowdown in small- and mid-cap listings in the Poland IPO market. There were two deals each on the Warsaw main market and the junior market NewConnect in market and 0 on NewConnect compared to six and IPOs Private equity remains an active driver, particularly of deals have accounted for % of deal volume and % of proceeds, a marked increase over 0 where PE-backed deals combined accounted for 0% of total proceeds for the full year. With listings of PE-backed companies such as Grohe, Europe s biggest bathroom equipment maker, predicted to complete

10 prior quarters. In particular, economic data suggests steady stabilizing and regional debt markets are steadying. These conditions point to better valuations and suggest the coming quarter could be a better time to go public in the region. While real estate and technology are expected to be active industries, with investor appetite for yield ready to support new listings, there are no real sector clusters apparent in the region. largest British offerings in recent years. Meanwhile, in the Middle East, the Bank of London & the Middle East is set to list on the 0 Total Number of deals 0 Capital raised.. Average deal size % Increase / decrease vs 0 Number of deals -% -% Capital raised 0% expected IPOs by end of September. Source: Dealogic. Europe is seeing more mid-sized and large IPOs coming to the market, with PE-backed IPOs being a key driver, particularly in the mature economies conditions stabilizing, market volatility has subsided and valuations are improving. The conditions are right for Martin Steinbach EMEIA IPO leader, EY Asia is encouraging while deal numbers are expected suspension of new listings on mainland China continues to affect IPO activity level in the region. There were lower IPO quarter historically, this also weighed on total Asian proceeds region, although Singapore was an exception with total real estate offerings. from IPOs. Consumer staples, real estate and materials were the most active sectors by number of deals, while media and entertainment and consumer staples led by capital raised. to conduct small and medium sized IPO deals, as well as media and telecommunications, banking, retail and consumer economy, coupled with very easy monetary conditions, should support better activity in this market. More restrictive listing listing rules takes effect.

11 Prospects for new listings in the region are also more conditions, led by the developed economies, important for Investor appetite is likely to be strong for these offerings on the back of recent stock price rises. Deal sizes are starting to trend higher and PE-backed exits are on the rise. Companies expected Co., Ltd. and electronics manufacturer Japan Display Inc., while the life sciences and information technology sectors should also see a number of offerings coming to market. South East Asian exchanges are prominent in the pipeline of expected global IPOs, second to by volume, according to Dealogic data. We expect more IPO listings from emerging markets such as Thailand, Singapore, Malaysia and, to an extent, Indonesia. prevailing on the Indian IPO market. Bombay Stock Exchange government has indicated it will complete a program of state owned asset sales before next year s general election, with the sale of as much as % of Meridian Energy Ltd., the nation s Nonetheless, uncertainty around this outlook is heightened, anticipated plan to reduce its bond purchases on emerging markets. A surge in bearish investor sentiment, and higher market volatility, would mean fund managers could have offerings. The success of big-ticket listings near-term, such same time, a move from China s regulators to reopen the IPO market would be a welcomed boost to the Asian IPO market. Total Number of deals Capital raised.... Average deal size % Increase / decrease vs 0.. Number of deals % Capital raised -% -% expected IPOs by end of September.. Source: Dealogic. Conditions in the region are expected to 0 with a growing list of companies planning to conduct large IPOs in Hong markets in Mainland China are re-opened. We also expect more IPO listings from emerging markets such as Thailand, Ringo Choi Growth Markets leader, EY Loose monetary conditions are fueling investor appetite for equities and Japanese IPO activity is expected to accelerate in the coming months as a result, with up to Shinichiro Suzuki Japan IPO leader, EY

12 Global IPO highlights 03 Q3 Volume and value deals globally (% decrease on 03 Q) US$.b in capital raised (% decrease on 03 Q) Pipeline is building More than,000 companies globally, including more than,000 Asian companies Developed vs. rapid-growth Emerging markets represent 8 of the top 0 IPOs in 03 Q3. Despite a comparatively quiet third quarter, global IPO activity is expected to lift through the remainder of the year and into 0. The uplift in activity will vary from region to region both in terms of timing and pace. Maria Pinelli, Global Vice Chair, Strategic Growth Markets Developed Rapid-growth Financial investors dominate PE- and VC-backed IPOs drive global deal activity. Three sectors trending % PE and VC account for % of US IPOs and % of global IPOs by deal volume. Energy US$.b ( deals) Real estate US$.b (0 deals) Health care US$.3b (3 deals) Home and away of the top 0 were listed on their home exchanges. Commentary Investors have been encouraged by rising valuations but moving forward, pricing remain a critical concern. brand names or earnings track records to obtain appropriate pricing and secure investor support. Maria Pinelli, Global Vice Chair, Strategic Growth Markets Home

13 US tops the leaderboard % US issuers dominated the global IPO market, accounting for % of global funds raised. US$.b Envision Healthcare Holdings Inc. (US) Top 3 deals in 03 Q3 US$0.8b American Homes Rent (US) US$0.8b Frank's International NV (US) Volume of deals 3% 8% North America 30% % Asia-P Asia- P 30% ranked nd by amount of global funds raised. Top three exchanges by funds raised US$ US$ SGD Top three countries by deal volume 0 New York NASDAQ Singapore US Greater China Singapore and UK Number of deals Con ce is growing VIX Con ce continues to build as the VIX falls and the central banks stimuli continue. Rising equity markets are a positive for IPOs MSCI World Equities Index is up % since the end of 0. Only postponed or withdrawn IPOs in 03 Q3, 0% down on 0 Q3. % of global IPOs priced within or above expectations. Focus on open-price IPOs with deal value above US$0m. 3

14 EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. About EY s IPO services EY is a leader in helping to take companies public worldwide. With decades of experience, our global network is dedicated to serving market leaders and helping businesses evaluate the pros and cons of an IPO. We demystify the process by offering IPO readiness assessments, IPO preparation, project management and execution services, all of which help prepare you for life in the public spotlight. Our Global IPO Center of Excellence is a virtual hub which provides access to our IPO knowledge, tools, thought leadership and contacts from around the world in one easy-to-use source. ey.com/ipocenter ED None This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. ey.com Find out more about future IPO prospects For more information on global IPO performance Global IPO Center of Excellence: ey.com/ipocenter markets and equity market volatility.