An overview of Q Play it again, London. There were no GDR listings during Q2, compared to one in Q1.

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1 IPO Eye An overview of Q Play it again, London The London Stock Exchange continues to show signs of recovery, already raising more capital in the year to date than in all of London is also starting to reassert its global status, ranking third in the highest number of deals this quarter, behind only the New York Stock Exchange and the NASDAQ. An appealing list of high profile IPOs could also materialise in the coming months. EY s IPO Eye is a quarterly publication for those with a vested interest in Initial Public Offerings (IPOs) on the London Stock Market. IPO Eye provides data and analysis on new issues for both the Main Market and AIM. We identify market trends and provide insight for those companies looking to float in the future. If you have any feedback please me at dvaughan@uk.ey.com David Vaughan IPO Leader EY London is starting to reassert its global status, ranking third in the highest number of deals this quarter. Market commentary There were three Main Market IPOs in Q2, compared to four last quarter (including two readmissions). Q saw only one. AIM continues to attract a healthy number of admissions, with eleven listings during Q2, compared to five in Q1. The last time we saw a similar level of AIM activity was Q s eleven listings. Total funds raised in the year to date are 2.4bn, including funds raised this quarter of 1.2bn. This already surpasses 2012 s total ( 1.5bn), and that raised in Q ( 0.2bn). So far in 2013, including readmissions, there have been seven Main Market IPOs (full year 2012: four), and sixteen AIM listings (full year 2012: 32). There were no GDR listings during Q2, compared to one in Q1. Q2 also saw two conversions from the Main Market to AIM. London continues to attract a healthy blend of international and domestic offerings. Five of the fourteen companies raising funds were non-uk domiciled. The UAE was responsible for bringing the second healthcare IPO in a year Al Noor Hospitals to the Main Market, following NMC Healthcare, which listed last June. Other listings included offerings from Nigeria, Israel and the US. No particular sector dominated in Q2, with a diverse range of companies coming to market, including technology, oil and gas exploration, healthcare and insurance providers. Whilst total monetary funds raised by technology this quarter were relatively low ( 25mn), it was encouraging that there were four technology offerings. From a global point of view, the IPO window is also reopening, thanks to rising equity markets and a wave of recent larger deals globally, which is having an ice-breaker impact on the market. Projected Q was expected to achieve 195 deals worldwide, raising US$46.4bn, compared to 206 deals raising US$41.8bn in the same period last year, an 11% increase in capital raised. Combined with improved global monetary policy, market confidence is growing, particularly in the US, Japan, UK and parts of Latin America. These factors, combined with a strong registration pipeline, suggest a strong second half for the year.

2 arket listings Table 1: New issues Main Market Q Date of admission Company PE backed Country of incorporation Region of domicile Sector Market cap. on admission ( mn) 22-May-2013 Al Noor Hospitals Yes UAE UAE Healthcare Jun-2013 Partnership Assurance Group Plc Yes UK UK Insurance 1,540 Table 2: New Issues AIM Q Date of admission Company PE backed Country of incorporation 28-Jun-2013 IBEX Global Solutions Plc Yes UK US Region of domicile Sector Consultancy Services (Outsourcing) Market cap. On admission ( mn) Jun-2013 Africa Oilfield Logistics Limited No Guernsey Nigeria Oil & Gas exploration Jun-2013 Falanx Group Limited (Tbc) No British Virgin Islands British Virgin Islands Security Consultancy Jun-2013 Versarien Plc No UK UK Industrial Engineering May-2013 Outsourcery Plc Yes UK UK 22-May-2013 AB Dynamics Plc No UK UK 21-May-2013 Quixant Plc No UK UK Technology (cloud computing and unified communications provider) Automatives equipment manufacturer Technology (Slot machine technology) May-2013 Lekoil Limited (the Company, or, together with its subsidiaries, the Group ) No Cayman Islands Nigeria Oil & Gas exploration Apr-2013 Cambridge Cognition Hldgs Plc No UK UK Healthcare Apr-2013 One Media IP Group Plc No UK UK Technology (broadcasting) Apr-2013 Electrical Geodesics Inc No UK United States Technology (healthcare) Main to Aim Date of admission Company PE backed Country of incorporation Region of domicile Sector Market cap. on admission ( mn) 04-Jun-2013 Superglass Holdings Plc UK UK Industrial Engineering 25-Apr-2013 Helphire Group UK UK Automotives What constitutes an IPO? Not all new admissions, as listed by the London Stock Exchange, are defined as IPOs for the purposes of the commentary throughout this report. Our definition excludes secondaries, funds, transfers from AIM to Main (and vice-versa), GDRs, and introductions where no money is being raised, or shares placed with new investors. 2 IPO Eye Q2 2013

3 Funds raised ( mn) Placing price (p) Closing price (after first day of trading) Closing price (at quarter end) % change in price % % Funds raised ( mn) Placing Price (p) Closing price (after first day of trading) Closing price (at quarter end) % change in price % % % % % % % % % % % Funds raised ( mn) Placing price (p) Closing price (after first day of trading) Closing price (at quarter end) % change in price IPO Eye Q

4 n this quarter Market commentary Main Market Q2 delivered three more Main Market IPOs to go with the four Main Market IPOs in Q1. Encouragingly, there is also a number of other waiting in the wings; anticipated to come through in the next two quarters. It paints an exciting picture for The listing of Partnership Assurance, the UK private-equity backed life insurer, grabbed the headlines this quarter, raising 485mn. Priced near the top end of its range at 385p, its offering was highly subscribed, and closed its first day of trading at 450p. The company s market capitalisation of 1.5bn would imply it is in line for inclusion in the FTSE 250 index in the coming months, joining Countrywide and Crest Nicholson as 2013 s FTSE 250 offerings. Al Noor Hospitals became the second UAE-based healthcare company to list on the Main Market, raising 221mn and achieving a market capitalisation of 672mn. Middle Eastern companies continue to be attracted to listing in the UK, despite rising equity values in their own home exchanges. The third Main Market admission was the investment company Platform Acquisition Holdings, backed by former City minister Lord Myners and billionaire Nicholas Berggruen, which raised funds of 581mn. The pair had also been responsible for the flotation of an earlier investment company Justice Acquisitions Holdings in 2011, which ultimately acquired a large share in the fast food chain Burger King. Partnership Assurance s market capitalisation of 1.5bn implies it is in line for inclusion in the FTSE 250 index in the coming months. FTSE Indices /01/ /02/2013 Date FTSE 100 FTSE All-Share FTSE 250 Source: S&P Capital IQ 02/03/ /04/ /05/ /06/2013 FTSE AIM AIM Q2 tends to be productive for AIM listings, and this quarter proved no exception, with 11 AIM deals taking place. Whilst the size of each offering has been small for the last two quarters (the largest was oil and gas explorer Lekoil Ltd which raised 32mn), it was encouraging to see four diverse technology companies coming to market: OneMedia (broadcasting technology), Quixant (slot machine technology), Electrical Geodesics (healthcare technology) and Outsourcery (cloud computing technology). US-based broadcasting technology firm OneMedia s offering raised 5mn, showing small US technology firms growing preference to list on AIM, as opposed to NASDAQ where they risk getting lost alongside technology giants like LinkedIn. Pricing The first five months of the year have seen ideal listing conditions, with average volatility stable, and the UK stock markets performing well. However, June saw a sudden rise in average volatility, and falling stock market prices, mainly as a result of the Fed setting out a framework for ending its third round of quantitative easing in June, and credit crisis problems in China. It remains to be seen whether this will dissuade potential offerings; it was against this backdrop that Al Noor Hospitals successfully listed late this quarter. It went in at the lower end of its 575p 625p range, but still managed to receive a price/earnings multiple of 15 times, which was higher than its fellow UAE healthcare stock NMC, currently trading at a ratio of 13 times, and ended the quarter at 633p. Partnership Assurance s listing performance was one of the quarter s highlights it priced at the top end of its range (385p), and closed its first day at 450p (a 17% increase on offer price). Its market capitalisation implied a P/E ratio of 29 times its 2012 earnings, indicating that investors are willing to pay well for a quality proposition, and closed above its offer price at 26% at the end of the quarter. Platform Acquisition Holdings also closed above its offer price at 4% at the end of the quarter. On the whole, AIM offerings performed relatively well on their first day of trading and posted positive gains. At the end of the quarter, only three of the eleven AIM companies closed below its offer price. 4 IPO Eye Q2 2013

5 The future of AIM London s junior stock exchange is now old enough to vote in general elections! In its lifetime to date, it has seen a high proportion of international companies, and in recent years an increasing dominance of resource companies. We explore the evolution of AIM and what the average company looks like today. On 19 June 2013, AIM celebrated its 18th anniversary. It started in 1995 with just 10 domestic companies. Since then, it has seen over 3,000 admissions, including 600 international admissions, reaching a membership peak of 1,694 at the end of Since 2007, AIM has seen a significant decrease in membership, with 1,087 members at the time of writing. Whilst there is a natural amount of shedding by way of delistings every year, as some companies graduate to the Main Market and others are subjected to reverse takeovers, difficult economic conditions in the past five years have played a large part in reducing new admissions and increasing delistings. The last five years have seen AIM s sectoral balance shift from being financial services dominated market to a more resource companies-driven one. Many companies listed during the boom period but could not survive the recession. The recession also afforded opportunities to venture capitalists, private equity firms and large corporates to acquire small AIM-listed companies. As the chart shows, delistings rose from 2007 to 2009, at the same time as new admissions dropped, and the global economy began Since 2011, the number of delistings has started to bottom out and stabilise, as the remaining companies on AIM seem strong enough to prevail in the current economic conditions, whilst the number of listings has also shown signs of rising. to slow. However, in the last two years, delistings have started to stabilise, as AIM s remaining companies seem strong enough to prevail in the current economic conditions, and the number of listings has also shown signs of increasing. The last five years have also seen a moderate change in AIM s sectoral balance mainly from financial services-dominated to more resource companies-driven. As the above chart shows, since 2007 the number of resource companies (mining, oil and gas, utilities) has increased from 21% to 30%. Comparatively, the number of financial services and investment companies, hardest hit by difficult economic conditions, has decreased from 23% to 20%. Other sectors have decreased but generally maintained the same market proportion. AIM Companies Member Listing: No of companies 1,800 1,600 1,400 1,200 1, Year to date Total AIM companies Number of admissions Delistings Source: London Stock Exchange IPO Eye Q

6 nsights The majority of companies on AIM continue to be relatively small; the proportion with a market capitalisation of over 50mn remains in the 25 30% range. In December 2007, this was 29%, and at the end of June 2013, 25%. Similarly, the proportion of international companies on AIM has remained at 20%. The UK Government continues to incentivise AIM listings, and recently abolished stamp duty on AIM shares from April 2014 onwards. Amongst other measures, it is also proposing to allow individual savings accounts (ISAs), which are the UK s most popular tax-efficient schemes, to hold AIM shares. AIM sectoral split (Dec 2007) The importance of good governance Governance levels at listed companies are coming under increased scrutiny and shareholder activism is increasing. We explore what companies need to do in order to adhere to governance guidelines, and ensure they get good added value from the governance process. Good corporate governance has always been important for companies and investors, but recent widespread coverage of problems at a number of listed companies has pushed it sharply up the corporate and wider agenda. 27, 1% 384, 23% 180, 11% 117, 7% 328, 19% Source: London Stock Exchange AIM sectoral split (May 2013) 13, 1% 223, 20% 106, 10% 65, 6% 162, 15% Source: London Stock Exchange 349, 21% 308, 18% 323, 30% 195, 18% Mining, Oil, Gas & Utilities Consumer Goods & Services Telecommunications Technology Industrials Health Care Financials Mining, Oil, Gas & Utilities Consumer Goods & Services Telecommunications Technology Industrials Health Care Financials A Premium Listed company must comply with the UK Code of Corporate Governance which, together with the Listing Rules, DTR and UK company law, forms the governance framework for listed companies. Companies with a standard history, which are required to meet EU minimum admission criteria, are subject to less comprehensive standards of disclosure and stakeholder rights. AIM companies are encouraged, as a minimum, to adhere to the Quoted Companies Alliance guidelines, which are based on the Code but tailored to their needs. The Code operates a comply or explain principle. In 2012, approximately 50% of FTSE 350 companies claimed to be fully compliant and a further 29% complied with all but one of the Code s 48 provisions *. The data also suggested that compliance rates amongst FTSE small cap companies are consistent with those for larger companies. Governance levels at listed companies are coming under increased scrutiny and shareholder activism is increasing. There are also a number of changes coming in the next few years. In addition, there are calls for FTSE Index companies to be fully compliant. Early consideration of governance issues is therefore key for a company looking to list. In particular it should focus on: Identifying and understanding specific requirements. Deciding on its governance structure and board composition. Making sure the business is adequately resourced from day one. Balancing the focus on the transaction with day-to-day governance and risk management. Governance is not a just a box to tick. Demonstrating that your business operates like a PLC pre IPO helps investor confidence and ultimately adds value. The most important of these is to bring non-executive directors on board early. The Board is key to running a successful business, and companies must not underestimate the time taken to assemble a Board who can work together and add value. Governance is not a just a box to tick, it should be embedded in an organisation s culture. Being able to demonstrate that a business operates like a PLC pre IPO helps investor confidence and ultimately adds value. * Source: Grant Thornton Corporate Governance Review IPO Eye Q2 2013

7 Location, location, location The globalisation of financial markets has meant that many businesses are open to going public on exchanges outside their domestic market, such as the likes of Manchester United and Glencore in recent years. We explore why location is the hot topic for budding IPO candidates and what companies may wish to consider when shopping for a market. London is the world s most international stock exchange, attracting business from around the globe. NYSE and Nasdaq have long held an attraction for technology businesses wherever they may be based. It is still the case though that most companies choose their home market for their primary listing. However, with the globalisation of financial markets, continued growth in emerging economies and the level of competition between exchanges increasing, we have seen significant interest from clients representing a whole range of sectors looking to evaluate the benefits and risks of listing internationally. Indeed, there are many recent high-profile examples of businesses going public on exchanges outside their domestic market Manchester United, NMC Healthcare and Prada to name a few. All companies should spend time evaluating the different options available regarding potential exchanges. This evaluation can be best approached from two perspectives the national and the sectoral. In our view, companies should evaluate the different options available regarding potential exchanges. This can be best approached from two perspectives national and sectoral. The national perspective A company s home market is often regarded as the country where it has its principal operations and in which it is, usually, incorporated. This is where companies usually go public, and where investors expect the listing. A company is intimately linked to the economy, culture, infrastructure, technology base and taxes of its home country, and committed to its relevant capital market regulations. The sectoral perspective However, a company can also be said to be at home in a market where people best understand and evaluate its business model. The marketplace where many comparable companies are listed, which has sector specific analyst expertise and attracts investors in the sector, can also therefore be regarded as a company s home market. In determining which market is right for your company, in our opinion, four overriding factors require careful examination: Motivation and strategic goals Valuation and market infrastructure Stakeholder preferences Costs, both initial and ongoing. IPO Eye Q

8 nsights Other factors motivating companies to go public outside their home market vary according to their country of incorporation, but include regulatory requirements, uncertainties regarding the listing process and waiting or processing times during the approval of its prospectus and the registration of the securities. Selecting the right capital market, stock exchange and listing segment enables you to determine the regulatory requirements your company will have to meet. In the run-up to going public, your company s internal structures (legal, tax, organisational) and units (management, accounting, IR) have to be checked and prepared to meet the relevant requirements. These measures are essential to maintain the profile of a listed company and meet investors and regulators requirements. The first key steps in this phase involve determining the appropriate capital market strategy and achieving internal capital market capability. EY has a deep understanding of global exchanges and can help you evaluate your listing destination, and, whether your listing is far from your company s country of incorporation or closer to home, our experienced professionals will be happy to provide you with on-site support as you take the journey to life as a public company. Strategy Speed of approval process Liquidity on the stock exchange Total flotation and ongoing post IPO costs Strategic fit: Consumers Growth markets Scope of capital market regulations Americas EMEA IPO Availability of analyst expertise Investor base and attention Valuation level of comparable companies Asia Pacific Valuation Trend: listings of comparable companies Peer companies Language and culture Initial and ongoing stock exchange requirements Home market Prestige and critical mass of the marketplace Costs Legal and market risks Currency: M&A target market Financing growth Brand recognition potential Participation in indices Preferences 8 IPO Eye Q2 2013

9 Relevant programmes IPO Retreat Looking to float in the next months? Look no further than our IPO Retreat an exclusive invitationonly event for a select group of CEOs and CFOs contemplating an IPO on one of the London markets. Not only will our IPO Retreat give you unparalleled advice from key advisors and guest speakers who have been through the process, but it will also provide invaluable networking opportunities. An IPO is not for everyone but our IPO Retreat offers an invaluable opportunity to find out whether it is the right growth option for your business. Watch this space for further details on the next retreat. To view key insights from our May 2013 IPO Retreat, visit To find out more, contact Drew Cordell at dcordell@uk.ey.com. EY Entrepreneur Of The Year 2013 announces UK finalists In October 2013, 43 companies will go on to compete in the Entrepreneur Of The Year 2013 UK awards with one company being crowned the overall winner. The 2013 UK finalists have combined revenues of 5bn, employ over 54,000 people and, despite the economic gloom, are growing revenues by 12% year on year. To find out who is representing your region visit EY Global IPO Center of Excellence Our Global IPO Center of Excellence is a virtual hub which provides access to tools and knowledge for every step of the journey from finding out more about what going public means to considering capital raising options and addressing post-ipo risks. It provides access to all our IPO knowledge, tools, thought leadership and contacts from around the world in one easy-touse source. IPO Eye Q

10 IPO Retreat 2013 On May 2013, EY hosted its fourteenth annual IPO Retreat at The Oakley Court in Windsor. To get an insight into the key messages and highlights of the Retreat please view the photograph, presentation clips and interviews with our guest speakers. The event was attended by CEO s and CFO s from 26 companies who are considering an IPO over the coming one to three years. Our IPO Retreat was a two-day event, aimed at demystifying the IPO process. The attendees were able to hear first-hand from our guest speakers Peter George, CEO, Clinigen Group and Peter Bergin, CFO, Crest Nicholson of companies that listed in 2012 about what was involved on a personal and company level. It was encouraging to hear their journey and their views in believing that taking the IPO route was the right decision in support of the growth strategy for their companies and would not have altered their plans in hindsight. As well as presentations from CEOs and CFOs, we also heard from advisors, fund managers and non-executive directors. The common themes through-out all of the presentations were: Reviving the IPO Market presented by the London Stock Exchange Pricing and timing your IPO IPO Communications building reputation and enhancing value Getting your house in order a legal perspective Insights from a fund manager We have run these retreats for the last eight years during buoyant and turbulent market conditions as there has always been demand from companies considering an IPO as a growth option. We continue to hold these retreats as our research show that the attendees find this a valuable fact-finding mission on the IPO process. In addition, it enables the EY IPO team to get closer to the real issues that CEOs and CFOs face themselves and for their companies in these challenging times. Why float? Getting ready: IPO Readiness An excellent opportunity away from the office to consider the issues, learn about the IPO process and discover the hurdles. Very worthwhile attending! 10 IPO Eye Q2 2013

11 IPO specialist team For more information contact our international specialists or alternatively speak to your local EY adviser. David Vaughan IPO Leader Tel: dvaughan@uk.ey.com Guy Carr UK IPO Director Tel: gcarr1@uk.ey.com Richard Harding Partner, UK North Tel: rharding@uk.ey.com Richard Hall Partner, London Tel: rhall2@uk.ey.com David Wilkinson Partner, UK South Tel: dwilkinson@uk.ey.com Neil Patey Partner, Scotland Tel: npatey@uk.ey.com Steve Collins Director, Americas Tel: scollins@uk.ey.com Nadeem Khan Director, India Tel: nkhan1@uk.ey.com Marcus Bailey Executive Director, Middle East and Africa Tel: mbailey2@uk.ey.com Timothy Pinkstone Director, Russia and CIS Tel: dpinkstone@uk.ey.com Please visit for more information on how we can help you or your business. IPO Eye Q

12 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 separate legal entity. Ernst & Young Global Limited, a UK company limited 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. Ernst & Young LLP The UK firm Ernst & Young LLP is a limited liability partnership registered in England and Wales with registered number OC and is a member firm of Ernst & Young Global Limited. Ernst & Young LLP, 1 More London Place, London, SE1 2AF Ernst & Young LLP. Published in the UK. All Rights Reserved. ED None indd (UK) 07/13. Artwork by Creative Services Group Design. In line with EY s commitment to minimise its impact on the environment, this document has been printed on paper with a high recycled content. Information in this publication is intended to provide only a general outline of the subjects covered. It should neither be regarded as comprehensive nor sufficient for making decisions, nor should it be used in place of professional advice. Ernst & Young LLP accepts no responsibility for any loss arising from any action taken or not taken by anyone using this material. ey.com/uk