Equity Capital Markets 2018 Review kpmg.com/uk/equitycapitalmarkets
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.
2018 Full Year Snapshot 2018 saw a reduction in UK equity market fundraising after a particularly strong 2017. 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 2018 35.9bn 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) 50 40 Largest UK IPOs in 2018 Aston Martin Lagonda Global Holdings plc 1.1bn 30 20 Smithson Investment Trust plc 823m Vivo Energy plc 603m 0 2016 2017 2018 IPOs Right Issues Placings UK IPO fundraising fell on both the Main Market and AIM Main Market Funds raised ( 000m) No. deals 20 60 AIM Funds raised ( 000m) No. deals 2.5 50 15 45 2.0 40 30 1.5 30 1.0 20 5 15 0.5 0 2016 2017 2018 0 0.0 2016 2017 2018 0 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
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. H2 2018 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 2017. 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.
UK Equity Capital Markets in H2 2018
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) 25 20 15 5 Funds raised ( 000m) 4 3 2 1 0 0 H2 H1 H2 H1 H2 H2 H1 H2 H1 H2 2016 2017 2017 2018 2018 2016 2017 2017 2018 2018 IPOs Rights Issues Placings Largest completed ECM deals in H2 2018 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 H2 2018 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.
H2 UK IPO highlights In H2 2018 both the number of IPOs and total equity raised fell compared to H2 2017, with some large IPOs struggling in the after-market H2 2018 Headlines for UK IPOs 5.3 billion IPO funds raised, 29% down from H2 2017 Combined market capitalisation of 18.9 billion Key metrics H2 2018 37 IPOs 35% down from H2 2017 Key H2 2018 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 H1 2018 (41 IPOs), due to a reduction in the number of AIM IPOs, total equity raised in H2 exceeded the 4.3bn raised in H1 2018. 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 H1 2018 and H2 2017 although, on average IPOs during H2 2018 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 H2 2018 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
IPO review: UK Main Market and AIM IPO activity on the Main Market was resilient across both H1 and H2 2018. AIM saw a noticeable decline in IPO numbers and transaction volumes Main Market IPO activity (2012 to H2 2018) 15,000 50 Monthly Main Market IPO activity (Last 18 months) 5,000 Funds raised ( m) Funds raised ( m) 8 8 12,000 40 4,000 8 7 39 33 31 9,000 27 27 6 26 30 3,000 6 5 5 5 5 23 4 4 6,000 16 16 20 2,000 14 3 3 4 3 13 13 3,000 8 3 3 1,000 4 2 1 2 2 0 0 0 0 H1 2012 H2 2012 H1 2013 H2 2013 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 H1 2017 H2 2017 H1 2018 H2 2018 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 H1 2018. 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 2,000 39 36 40 700 12 30 600 1,500 30 25 23 500 8 20 19 20 400 6 6 6 1,000 18 6 6 6 20 6 21 5 15 300 4 4 500 200 3 2 2 2 2 2 0 1 1 1 2 0 0 0 H1 2012 H2 2012 H1 2013 H2 2013 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 H1 2017 H2 2017 H1 2018 H2 2018 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 2015. 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 H1 2018. 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.
KPMG s Capital Advisory
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.
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. 2018 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. 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
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.
Contact us Linda Main Partner, Head of UK Capital Markets linda.main@kpmg.co.uk +44 (0) 207 311 8574 Svetlana Marriott Marco Schwartz Partner, UK Capital Markets Managing Director, Head of Equity Capital Markets Advisory UK svetlana.marriott@kpmg.co.uk marco.schwartz@kpmg.co.uk +44 (0) 207 694 4041 +44 (0) 207 311 2975 Rob Crowley Director, UK Capital Markets robert.crowley@kpmg.co.uk +44 (0) 207 694 5813 Graham Hertrich Director, Equity Capital Markets Advisory UK graham.hertrich@kpmg.co.uk +44 (0) 207 311 5114 Helen McCourt Director, UK Capital Markets helen.mccourt@kpmg.co.uk +44 (0) 161 2464 908 Nina Smith Director, UK Capital Markets nina.smith@kpmg.co.uk +44 (0) 207 694 5813 Sergey Baskakov Associate Director, UK Capital Markets sergey.baskakov@kpmg.co.uk +44 (0) 207 694 5294 Adam Evans Associate Director, UK Capital Markets adam.evans2@kpmg.co.uk +44 (0) 207 694 8997 Johan Collin Manager, UK Capital Markets johan.collin@kpmg.co.uk +44 (0) 207 694 5425 Edward Corbett Manager, UK Capital Markets edward.corbett@kpmg.co.uk +44 (0) 118 964 2099 James Mott Charlotte Sutcliffe Manager, UK Capital Markets Manager, Equity Capital Markets Advisory UK james.mott@kpmg.co.uk charlotte.sutcliffe@kpmg.co.uk +44 (0) 118 964 2142 +44 (0) 207 311 8145 Ruth Watts Manager, UK Capital Markets ruth.watts@kpmg.co.uk +44 (0) 207 694 3317 Shalin Bhamra Assistant Manager, Equity Capital Markets Advisory UK shalin.bhamra@kpmg.co.uk +44 (0) 207 694 4134 Alexander Burke Krishna Mehta Assistant Manager, UK Assistant Manager, UK Capital Markets Capital Markets alexander.burke@kpmg.co.uk krishna.mehta@kpmg.co.uk +44 (0) 2380 206 095 +44 (0) 207 694 4514 Josephine Slater Assistant Manager, UK Capital Markets josephine.slater@kpmg.co.uk +44 (0) 207 311 5138 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. 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. The KPMG name and logo are registered trademarks or trademarks of KPMG International