Equity Capital Markets 2018 Review

Transcription

1 Equity Capital Markets 2018 Review kpmg.com/uk/equitycapitalmarkets

2 Report Methodology Notes: Data in this report has been sourced from Dealogic. Data relating to Average returns in 2018 for FTSE0 and FTSE All-Share under the heading 2018 UK IPOs have outperformed major UK equity indices on page 2 has been sourced from Thomson Reuters Datastream. Data - contained in this report has been generated at 31 December 2018 and includes priced transactions only. In this document, UK includes LSE Main Market and Alternative Investment Market (AIM). Where report refers to Placings, this consists of accelerated transactions (including rights issue rump placings), bought deals, fully marketed follow-ons, - cash placings, PIPE transactions, at-the-market - - transactions, top-up - placement transactions, and registered direct offerings as per Dealogic classifications. Where the report refers to Rights Issues this consists of rights issues, open offers and other guaranteed preferential allocation transactions as per Dealogic classifications. Note that Dealogic data only captures Rights Issue deal volumes when the results of the rights issue are announced, post-trading - of the rights. For individual rights issue transactions shown on pages 4 and 6, total deal value includes the value of the rump placing at the placing price. Where report refers to IPOs that have priced in H1 2017, the Allied Irish Bank transaction (23 Jun) and Polyus Gold OAO transaction (30 June) have been included. After-market - performance across Main Market and AIM IPOs has been calculated by taking a weighted average of the percentage change between the offer price and prevailing closing share price as at 31 December 2018 over all IPOs that have been successfully admitted 1 to Equity trading Capital in the period; Markets weighted review by H1 Market 2018 Capitalisation upon successful completion of the IPO.

3 2018 Full Year Snapshot 2018 saw a reduction in UK equity market fundraising after a particularly strong Despite this, an increase in rights issues and the completion of several highly anticipated IPOs in the second half ensured that UK equity fundraising remained robust in bn total equity raised 9.6bn raised via IPO 78 number of IPOs 7.1bn raised via rights issue 19.2bn raised via placing 2018 has seen UK Equity Capital Markets fundraising retreat UK equity issuances over the past three years Funds raised ( 000m) Largest UK IPOs in 2018 Aston Martin Lagonda Global Holdings plc 1.1bn Smithson Investment Trust plc 823m Vivo Energy plc 603m IPOs Right Issues Placings UK IPO fundraising fell on both the Main Market and AIM Main Market Funds raised ( 000m) No. deals AIM Funds raised ( 000m) No. deals Deal value # Deals 2018 UK IPOs have outperformed major UK equity indices Main Market IPOs FTSE All Share AIM IPOs FTSE AIM 0.2% 13.0% 0.3% 18.2% Average return post IPO (at 31 December 2018) Average return in 2018 (at 31 December 2018) Average return post IPO (at 31 December 2018) Average return in 2018 (at 31 December 2018) 2019 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. Equity Capital Markets 2018 Review 2

4 2018 review and 2019 outlook 2018 review: a more challenging backdrop for UK Equity Capital Markets The UK continues to lead pan European issuance, representing nearly 35% of fundraisings across the region in 2018 However, UK equity fundraising declined by approximately 12% in 2018 relative to 2017, with the number of ECM transactions falling by about 17% Funds raised through IPOs declined by 36%, with listed company fundraising also down by 13% Fundraising via rights issues and other preemptive offerings increased by over 80%, in part driven by significant fundraising by companies undertaking M&A The second half of the year saw a number of long-awaited IPOs price in the UK, with both Aston Martin and Funding Circle completing their listings on the LSE. H also saw more IPOs price on the Main Market when compared to the first six months of the year, with November being a particularly busy month However, 2018 ECM fundraising declined from the high levels seen in Issuers faced more challenging conditions, with market corrections in February, October and December. Despite this, UK IPOs that priced in 2018 outperformed major UK indices 2019: our outlook for the year ahead As we move into 2019, we expect to see another year of market volatility driven by Brexit, rising interest rates and the threat of further market corrections. These factors will continue to drive both issuer and investor sentiment, and could affect overall appetite to undertake capital markets transactions As certain sectors of the UK economy continue to experience challenging trading conditions, we anticipate the potential for further equity fundraising and rationalisation by companies seeking to strengthen their balance sheets and increase financial flexibility The investment funds sector continued to exhibit robust equity fundraising activity in 2018, demonstrating the ongoing attractiveness of sustainable yields across a variety of asset classes. We expect the outlook for interest rates to remain an important driver of investors appetite to deploy capital in this sector London remains an attractive listing venue for international issuers. This year, the market expect to see a number of Chinese companies take the opportunity to access London s deep capital markets Despite the lower UK IPO count in 2018, the conclusion of several large and high-profile IPOs clearly shows that a London listing remains an attractive strategic option for high quality, well-managed companies As we look ahead to 2019, we advise our clients to maximise the potential for a successful deal through early preparation. When markets exhibit volatility and uncertainty, flexibility to launch is critical, making it essential to be transaction-ready 3 Equity Capital Markets 2018 Review 2019 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved.

5 UK Equity Capital Markets in H2 2018

6 The UK ECM landscape Main Market equity fundraising has fallen from H1 to H2 2018, driven by a reduction in placings. Fundraising on AIM has continued to reduce Main Market All ECM Activity 30 AIM All ECM Activity 5 Funds raised ( 000m) Funds raised ( 000m) H2 H1 H2 H1 H2 H2 H1 H2 H1 H IPOs Rights Issues Placings Largest completed ECM deals in H Aston Martin Lagonda Global Holdings plc DS Smith plc Phoenix Holdings Ltd Smithson Investment Trust plc 823m DCC plc 606m 1,083m 1,041m 962m Most active sectors in H by funds raised Financial Services 3,627m raised (42 deals) Notable deals: Smithson Investment Trust plc, Nova Ljubljanska Banka, Metro Bank plc, Trian Investors 1 Ltd, Sequoia Economic Infrastructure Income Fund Ltd, BioPharma Credit plc, AJ Bell plc Real Estate & Property 1,731m raised (14 deals) Notable deals: Grainger plc, Tritax EuroBox plc, Glenveagh Properties plc, LXI REIT plc, Countrywide plc, Urban & Civic plc, Triple Point Social Housing REIT plc, Grit Real Estate Income Ltd Technology & Software 1,712m raised (48 deals) Notable deals: Funding Circle Holdings plc, Plus500 Ltd, Avast plc, ASOS plc, Playtech plc, Sensyne Health plc, Learning Technologies plc IPOs Rights Issues Placings The second half of 2018 was mixed for fundraising activity on UK equity markets. The Main Market welcomed some high profile IPOs, whilst also seeing robust capital raising through rights issues, however, the amount raised via placings in H2 across both markets was at its lowest level for seven years. AIM was unable to maintain its strong recent fundraising record with total equity raised across IPOs, placings and rights issues falling to its lowest level in six years. Linda Main, Partner, Head of UK Capital Markets 5 Equity Capital Markets 2018 Review 2019 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved.

7 H2 UK IPO highlights In H both the number of IPOs and total equity raised fell compared to H2 2017, with some large IPOs struggling in the after-market H Headlines for UK IPOs 5.3 billion IPO funds raised, 29% down from H Combined market capitalisation of 18.9 billion Key metrics H IPOs 35% down from H Key H sectors by funds raised Financial Services Main Market AIM Number of deals 27 IPOs IPOs IPO funds raised 5,122 million 200 million Average IPO funds raised 190 million 20 million Average market capitalisation on IPO 671 million 78 million 2,236m raised (12 deals) Notable deals: Smithson Investment Trust plc, Nova Ljubljanska Banka, Trian Investors 1 Ltd, AJ Bell plc, ASA International plc Automotive 1,083m raised (1 deal) Notable deals: Aston Martin Lagonda Global Holdings plc Technology & Software 752m raised ( deals) Notable deals: Funding Circle Holdings plc, Sensyne Health plc Across the Main Market and AIM, a total of 37 companies successfully priced IPOs during H2 2018, raising 5.3bn. Although this was down on H (41 IPOs), due to a reduction in the number of AIM IPOs, total equity raised in H2 exceeded the 4.3bn raised in H The after-market proved challenging for several IPOs that priced in H2 2018, with a greater proportion of recent issuers seeing share price declines compared to H and H although, on average IPOs during H traded ahead of UK equity index benchmarks during the period. Nevertheless, the recent IPO of AJ Bell plc demonstrates that well-received transactions can perform positively, notwithstanding the challenging market backdrop. Marco Schwartz, Managing Director, Head of Equity Capital Markets Advisory, UK After-market performance of H IPOs (deal size > 50 million) 53% 50% 34% 35% 2% 3% 3% 7% (36)% Aston Martin Lagonda Global Holdings plc (15)% (22)% Funding Circle Holdings plc TheWorks.co.uk plc (9)% Sensyne Health plc (7)% Tritax EuroBox plc (6)% Mobius Investment Trust plc Gresham House Energy Storage Fund plc AVI Japan Opportunity Trust plc SDCL Energy Efficiency Income Trust plc Smithson Investment Trust plc Trian Investors 1 Ltd M&G Credit Income Investment Trust plc Merian Chrysalis Investment Co Ltd Hipgnosis Songs Fund Ltd ASA International plc Kazatomprom AJ Bell plc Nova Ljubljanska Banka 2019 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member Equity Capital Markets 2018 Review firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. 6

8 IPO review: UK Main Market and AIM IPO activity on the Main Market was resilient across both H1 and H AIM saw a noticeable decline in IPO numbers and transaction volumes Main Market IPO activity (2012 to H2 2018) 15, Monthly Main Market IPO activity (Last 18 months) 5,000 Funds raised ( m) Funds raised ( m) , , , , , , , , H H H H H H H H H H H H H H Funds raised ( m) Number of IPOs Funds raised ( m) Number of IPOs Overall, Main Market IPO activity in the second half defied a disappointing start to 2018, with both the number of transactions (27) and equity raised ( 5.1bn) increasing from H The weighting of IPO activity to H2, whilst arguably counter-intuitive given the shorter IPO window, may have indicated shareholders desire to achieve deal certainty ahead of Brexit. AIM IPO activity (2012 to H2 2018) 39 2, , , H H H H H H H H H H H H H H Number of IPOs Number of IPOs Funds raised ( m) Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Svetlana Marriott, Partner, UK Capital Markets Funds raised ( m) Monthly AIM IPO activity (Last 18 months) Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 0 Number of IPOs Number of IPOs Funds raised ( m) Number of IPOs Funds raised ( m) Number of IPOs With IPOs pricing in the second half of 2018, London s AIM recorded the lowest number of new market entrants in this half year than in any equivalent period since This may in part be attributed to heightened volatility and uncertainty across UK equity markets during H2 2018, which contributed to fewer launched transactions and an increase in the number of withdrawn IPOs. The average funds raised was 20m, 50% lower than H Graham Hertrich, Director, Equity Capital Markets Advisory, UK 7 Equity Capital Markets 2018 Review 2019 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved.

9 KPMG s Capital Advisory

10 Our equity capital market services Pre-IPO Pre-IPO readiness assessment Identifying the financial areas critical to a successful IPO Minimises delays and additional costs later in the process Independent IPO advisor Independent evaluation of IPO feasibility Early identification of IPO critical success factors Reward structuring Advice on potential executive and employee remuneration plans and benefits structuring Benchmarking against listed peers Tax structuring Tax structuring advice including areas such as the domicile of TopCo and re-registration vs. NewCo VAT treatment advice IPO execution IPO reporting accountant Financial, tax and commercial due diligence to give you comfort during the listing process Assess the control and governance frameworks and benchmark against listed company requirements Sign-off on the financial information included in the listing document Independent IPO advisor Independent advice on equity story, positioning, valuation and investor marketing Sounding board on key IPO decisions Support in selection and oversight of IPO bank syndicate Team of experienced former ECM bankers Company support and accounting advisory Additional resource to support your finance team with: project management; model building; IPO related memorandum drafting; accounting policy manual drafting; additional assistance with any tasks normally performed within your finance team Preparation of historical financial information (including carve-outs and GAAP conversions) Distributable reserves analysis Advice on IPO structuring from an accounting aspect (including impact assessments of new IFRS and accounting position papers) Advice on preparation of annual report (including benchmarking against peers) Advice on on-going accounting requirements as a listed company and training on new IFRS Post-IPO PLC reporting accountant Full reporting accountant suite of services for post-ipo transactions (e.g. acquisitions, disposals, reverse takeovers, rights issues, etc.) ECM advisory Independent financial advice for PLCs seeking to raise equity to fund M&A or enhance capital structure Advice for shareholders seeking to buy or monetise a stake in a public company Investor relations support Independent investor perception studies Advice on investor relations best practice Supporting effective engagement with high quality institutional investors KPMG can advise you throughout the IPO lifecycle 9 Equity Capital Markets 2018 Review 2019 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved.

11 Our highlights of 2018 During 2018 KPMG advised on several of the highest profile equity capital market transactions in the UK, including large IPOs, follow-on equity fundraisings, acquisitions and disposals. KPMG continues to be one of the leaders in the market in IPO reporting accountant mandates, advising a total of 9 companies onto London s capital markets, including the high profile listings of Aston Martin (the UK s largest IPO of 2018) and AJ Bell IPO reporting accountant market share By market capitalisation By number of IPOs KPMG 5% 6% PWC 12% % 36% EY 42% 14% 16% Deloitte % 27% BDO 12% % Other Source: Dealogic, London Stock Exchange statistics, Company announcements, KPMG analysis KPMG additionally acted as reporting accountant on a number of landmark non-ipo equity capital market transactions, including the acquisition of Regal Entertainment by Cineworld (which established the enlarged group as the second-largest cinema group in the world) and the Old Mutual managed separation process (through which KPMG also acted as the reporting accountant on the IPO of the demerged Quilter plc business). KPMG s Equity Capital Markets Advisory team also enjoyed an active year, delivering independent financial advice across a range of UK and International IPOs and public company fundraising transactions. Alongside transaction execution, our ECM Advisory team has worked closely with a number of companies seeking an early, independent perspective on transaction feasibility and preparation KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. Equity Capital Markets 2018 Review

12 Our selected 2018 transactions Main Market and AIM IPOs Aston Martin Lagonda Global Holdings plc Quilter plc Amigo Holdings plc AJ Bell plc Premium Main Market IPO Largest IPO of 2018 Premium Main Market IPO Cross-border with secondary listing on JSE Premium Main Market IPO Premium Main Market IPO 4.3 billion 2.8 billion 1.3 billion 651 million The SimplyBiz plc TheWorks.co.uk plc Odyssean Investment Trust plc Stirling Industries plc AIM IPO Premium Main Market IPO Premium Main Market IPO AIM IPO 130 million 0 million 87 million 9 million Other equity capital market transactions Old Mutual Limited Cineworld plc Capita plc Grainger plc Managed separation of the Cross-border (UK and South Africa) Class 1 acquisition of Regal Entertainment Cross-border (UK and USA) Rights issue Rights issue and class 1 acquisition 7.9 billion $3.6 billion 681 million 396 million Ascential plc Serinus Energy plc British Business Bank French Connection plc Class 1 disposal of Ascential Exhibitions business AIM admission Designated Markets Route Independent equity capital markets advisor on first public equity investment by the British Business Bank Equity advisory Class 1 disposal of Toast (Mail Order) Limited 300 million 36 million 30 million 23 million Source: Dealogic, London Stock Exchange statistics, Company announcements 11 Equity Capital Markets 2018 Review 2019 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved.

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14 Contact us Linda Main Partner, Head of UK Capital Markets +44 (0) Svetlana Marriott Marco Schwartz Partner, UK Capital Markets Managing Director, Head of Equity Capital Markets Advisory UK +44 (0) (0) Rob Crowley Director, UK Capital Markets +44 (0) Graham Hertrich Director, Equity Capital Markets Advisory UK +44 (0) Helen McCourt Director, UK Capital Markets +44 (0) Nina Smith Director, UK Capital Markets +44 (0) Sergey Baskakov Associate Director, UK Capital Markets +44 (0) Adam Evans Associate Director, UK Capital Markets +44 (0) Johan Collin Manager, UK Capital Markets +44 (0) Edward Corbett Manager, UK Capital Markets +44 (0) James Mott Charlotte Sutcliffe Manager, UK Capital Markets Manager, Equity Capital Markets Advisory UK +44 (0) (0) Ruth Watts Manager, UK Capital Markets +44 (0) Shalin Bhamra Assistant Manager, Equity Capital Markets Advisory UK +44 (0) Alexander Burke Krishna Mehta Assistant Manager, UK Assistant Manager, UK Capital Markets Capital Markets +44 (0) (0) Josephine Slater Assistant Manager, UK Capital Markets +44 (0) kpmg.com/uk The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International