ey global ipo trends report q3 2013 - ey - us · global total 160 100.0% 18,246.9 100.0% q3’13...

| 1

Contacts:

Maria Pinelli Global IPO Leader [email protected]

Jacqueline Kelley Americas IPO Leader [email protected]

Ringo Choi

[email protected]

Dr. Martin Steinbach EMEIA IPO Leader [email protected]

Shinichiro Suzuki Japan IPO Leader [email protected]

EY Global IPO Trends ReportQ3 2013

WelcomeWelcome 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 2014. 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 is projected to reach 197 deals with IPO

expected to be down 4% in terms of deal numbers and 47%

activity is projected to be slightly higher by deal numbers but

48 44 29 42 40 63 48

109 131 125

112 84

78 78

44 60

32 39

32 58

28

3

7

5 7

7

7

6

0

50

100

150

200

250

Num

ber o

f dea

ls

North AmericaEMEA Central and South America

Q1’12 Q2’12 Q3’12 Q4’12 Q1’13 Q2’13 Q3’13

Quarterly IPO deals by region*

6,280 23,333 4,109 9,725 9,079 13,791 8,773

7,915

15,494

19,240

14,617 5,668

17,942

5,436

3,476

1,886

1,2239,777

6,705

6,702

2,470

325

3,090

5,017

3,059

2,881

7,776

1,568

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

Q1’12 Q2’12 Q3’12 Q4’12 Q1’13 Q2’13 Q3’13

Pro

ceed

s (U

S$m

)

North AmericaEMEA Central and South America

Quarterly IPO proceeds by region*

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

12.94% at the start of August. Equity indices and IPO activity gathered steam concurrently, with the S&P 500 hitting its

months of 2012.

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.

Global IPO activity — Q3 analysisGlobal IPO activity softer in Q3’13, though the underlying improving trend is intact

Total

Number of deals 206 197 566

Capital raised 46.2 24.4 94.9

Average deal size 167.7

% Increase / decrease Jan–Sep

vs 2012 Jan–Sep

Number of deals -11.1% -4.4%

Capital raised -17.7%

2013 Global IPO activity by quarter

expected IPOs by end of September. . Source: Dealogic.

Source: Dealogic.

Source: Dealogic.

| 3

Issuer Name Sector Capital raised Exchange(s)

Envision Healthcare Holdings Inc

Health care 1,110.9 New York (NYSE)

American Homes 4 New York (NYSE)

Frank's International NV

Energy 759.0 New York (NYSE)

Deutsche Annington Immobilien GmbH

Deutsche Borse

Z Energy Ltd Energy 677.0 Australia (ASX)

Energy 495.2 New York (NYSE)

QEP Midstream Partners LP

Energy New York (NYSE)

475.9 Singapore (SGX)

Singapore (SGX)

Phillips 66 Partners LP Energy New York (NYSE)

Q3’13 Top 10 global IPOs by capital raised

Sector Number of deals

% of global deal number

Capital raised

% of global capital raised

Energy 21 5,601.7

20 12.5% 4,566.9 25.0%

Health care 14.4% 12.6%

Industrials 19 11.9% 7.9%

Technology 22 5.1%

Financials 16 10.0% 4.7%

5.0% 4.5%

Media and entertainment

6 714.1

Consumer staples 5.0%

Materials 9 5.6% 269.5 1.5%

Consumer products and services

6 26.2 0.1%

Telecommunications 2 11.6 0.1%

Global total 160 100.0% 18,246.9 100.0%

Q3’13 global IPOs by sector

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.

1

in September 2011.

underlying improving trend in global IPO activity is intact.

1

September, according to Dealogic data.

2

price, was at 4.5%2

Source: Dealogic.

Source: Dealogic.

4 |

9%

22%16%

25%

6%

13%10% 9%

42%

25%21%

14% 12%

4%0%

-9%

-20%

-10%

0%

10%

20%

30%

40%

50%

% Eq

uity

mar

ket r

etur

ns y

ear-

to-d

ate

2012 YTD return 2013 YTD return

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 100.7 on its latest reading, pushing further above its long-term average level of 100.0, to its highest level since April 2011.

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 near-term should not derail the better overall global outlook.

Outlook for Q4An improving global economic outlook is supportive for IPO activity in Q4’13, although monetary policy changes may heighten uncertainty

-2

-1

0

1

2

3

4

5

6

0

100

200

300

400

500

600

Number of IPOs OECD +6 Major Emerging Economies Leading Indicator

Num

ber

of IP

Os

Yea

r-on

-yea

r gr

owth

Q2’10Q3’10

Q4’10Q1’11

Q2’11Q3’11

Q4’11Q1’12

Q2’12Q3’12

Q4’12Q1’13

Q2’13Q3’13

Q4’13Q1’14

OECD Leading indicator growth vs. number of IPOs

Stronger performance in equities in many developed

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.

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

Source: OECD.stat, Dealogic.

Source: S&P Capital IQ.

| 5

24%16% 15% 18% 21% 25% 19%

76%84% 85% 82% 79% 75% 81%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Financial sponsored Corporate deals

Q1’12 Q2’12 Q3’12 Q4’12 Q1’13 Q2’13 Q3’13

Financial sponsored backed vs Corporate IPO deals

27

38

27

63

24

47

22

26

35

2620

2632

40

22

10

20

30

40

50

60

70

Num

ber

of IP

Os

Q1’10Q2’10

Q3’10Q4’10

Q1’11Q2’11

Q3’11Q4’11

Q1’12Q2’12

Q3’12Q4’12

Q1’13Q2’13

Q3’13

Global PE-backed IPOs by quarter*

IPO activity should lift in Q4’13In 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 Q4’12 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 2014.

PE-backed IPOs should also gain pace

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.

global market. PE-backed offerings slowed to 22 deals in the

that suggest PE-backed deals should rise. Filings are on an

companies waiting to go public. As at 20 September, there are 75 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

Source: Dealogic.

* Based on priced IPOs as of 19 September. Source: Dealogic.

6 |

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 12 September. At the same time, conditions

sector has experienced solid improvement in earnings in recent months, mainly in North America, 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.

Industry analysis

drive activity in Q4’13

16 1624

5

5

6

8

8

1

7

2

1

2

11

North America

EMEA

Central andSouth America

Asia-Paci c

$643

$1,551

$241

$2,330

1,293

$5,677

$1,811

$330

$75

$2

$452

North America

EMEA

Asia-Paci c

Financial*Financial — by number of deals


Q2’13

Financial — by capital raised (US$m)

Q1’13 Q3’13

$2,435 $858$11,112

3

2

1

16

4

9

1

17

2

6

2

9

22 1931

North America

EMEA


Asia-Paci c

North America

EMEA

Asia-Paci c

Industrial*Industrial — by number of deals


Q2’13

Industrial — by capital raised (US$m)

Q1’13 Q3’13

$2,053 $1,438$8,045

$790

$730

$89

$443

$1,279

$1,134

$560

$5,072

$219

$321

$776

$122

Source: Dealogic.

| 7

9

6

2

6

9

3

9

4

5

1

10

$1,418

$2,430

$1,067

$2,996

$1,564

$305

$2,555

$1,211

$1,267

$379

$1,710

23 2021

North America

EMEA


Asia-Paci c

North America

EMEA

Asia-Paci c

Real estate* Real estate — by number of deals


Q2’13

Real estate — by capital raised (US$m)

Q1’13 Q3’13

$7,911 $4,567$4,423

$443

$36

$265

$451

$1,377

$120

$260

$593

$197

$135

4

3

1

8

9

6

5

7

8

7

16 2220

North America

EMEA


Asia-Paci c

North America

EMEA

Asia-Paci c

Technology* Technology — by number of deals


Q2’13

Technology — by capital raised (US$m)

Q1’13 Q3’13

$1,196 $925$1,757

$1,230

$4

$598

$251

$445

$318

$409

$1,507

$3,276

$420

$411

$1,495

4

2

1

5

2

4

1

5

9

2

1

9

12 2112

North America

EMEA


Asia-Paci c

North America

EMEA

Asia-Paci c

Energy*Energy — by number of deals


Q2’13

Energy — by capital raised (US$m)

Q1’13 Q3’13

$2,083 $5,602$2,679

$2,879

$105

$101

$2,074

$614

$618

$2,037

$85

$184

6

4

5

14

10

7

16

3

4

15 2331

North America

EMEA


Asia-Paci c

North America

EMEA

Asia-Paci c

Health care* Health care — by number of deals


Q2’13

Health care — by capital raised (US$m)

Q1’13 Q3’13

$3,085 $2,307$3,305

Source: Dealogic.

8 |

Regional analysisUS continues its strong momentum and stronger IPO activity from Hong Kong and South East

The AmericasStrong US activity in Q3 with further upswing forecast, while conditions remain challenging in Central and South America

Total


Capital raised 14.7

Average deal size 260.4 219.4


vs 2012 Jan–Sep

Number of deals 5% 141%

Capital raised -7% -19% 45%

number of deals and 49% by capital raised.

already surpassed last year’s total — with 142 completed IPOs

of 2012 — 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 5.0%.

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 40% were at the lower end.

500 is currently trading at around 20 times reported earnings, close to the highest level since April 2010. 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 Central and South America remain

and historically slower activity during the summer months.

in 2012, due to improvement in listing activity from Brazil and Mexico exchanges.

expected IPOs by end of September. Source: Dealogic.

| 9

Total


Capital raised 2.9 7.2 1.1 11.2

Average deal size 411.6 1200.1 227.5


vs 2012 Jan–Sep

Number of deals -17% 25%

Capital raised 176% 26%

EMEAPositive signals in mature economies of Europe; PE a driver as larger deals dominate

IPO sentiment across Europe is improving. The region is

period in 2012. 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 10

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 20 on NewConnect compared to six and 62 IPOs

Private equity remains an active driver, particularly of deals

have accounted for 17% of deal volume and 56% of proceeds, a marked increase over 2012 where PE-backed deals combined accounted for 10% 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

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 2007

IPOs in 2012. Pricing — a top concern for investors — came under some pressure

higher and outperformed the S&P 500 index. This points to sustained activity in

Jacqueline Kelley | Americas IPO Leader, EY


10 |

Asia

is encouraging

4 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 15 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.

4

Total


Capital raised 5.1 12.9

Average deal size 176.0 101.5 127.9


vs 2012 Jan–Sep

Number of deals -22% -29%

Capital raised 204%

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

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

expected IPOs by end of September. Source: Dealogic.

| 11

Total


Capital raised 5.5 15.7 6.4 27.5

Average deal size 74.2 252.4


vs 2012 Jan–Sep

Number of deals 26%

Capital raised -59% -67%

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 North America 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 49% 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.

Conditions in the region are expected to

2014 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 |

Rap

id-g

row

th

Dev

elop

ed

Developed vs. rapid-growthEmerging marketsrepresent 8 of the top20 IPOs in 2013 Q3.

Three sectors trending

US$24.4bin capital raised

(47% decrease on 2013 Q2)

197(4% decrease on 2013 Q2)

Volume and value

deals globally

Maria Pinelli, Global Vice Chair, Strategic Growth Markets

More than 5,000 companies globally, including more than 1,000 Asian companies

Pipeline is building

“Despite a comparatively quiet third quarter, global IPO activity is expected to lift through the remainder of the year and into 2014. The uplift in activity will vary from region to region both in terms of timing and pace.”

Financial investors dominate

PE- and VC-backed IPOs drive global deal activity. PE and VC account for 47% of US IPOs and 19% of global IPOs by deal volume.

46%

Health careEnergy Real estate

US$4.6b(20 deals)

Global IPO highlights 2013 Q3

Commentary

Maria Pinelli, Global Vice Chair, Strategic Growth Markets

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.”

Home and away17 of the top 20 were listed on their home exchanges.

Home

1 1

US$2.3b(23 deals)

US$5.6b(21 deals)

“

| 13

US tops the leaderboard

US issuers dominated the global IPO market, accounting for 45% of global funds raised.

Top three countries by deal volume

US Greater China

Number of deals

ranked 2nd by amount of global funds raised.

Asia-P

30%

41

16

46%

Top three exchanges by funds raised

New York

US$NASDAQ Singapore

SGD

Envision Healthcare Holdings Inc.

(US)

US$1.1b US$0.8b

Asia-P

10

Volume of dealsCentral and

South America

NorthAmerica 30%

49%

3%

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 16% since the end of 2012.

92% of global IPOs priced within or above expectations.

Only 29 postponed or withdrawn IPOs in 2013 Q3, 40% down on 2012 Q3.

Con ce is growing

VIX

2 Focus on open-price IPOs with deal value above US$50m.

EMEA 18%

Top 3 deals in 2013 Q3

American Homes 4 Rent(US)

US$0.8bFrank's

International NV(US)

US$Singapore

and UK

2

1

14 |

Find out more about future IPO prospects

For more information on global IPO performance

Global IPO Center of Excellence:

ey.com/ipocenter

About EYEY 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 servicesEY 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.

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markets and equity market volatility.

ey global ipo trends report q3 2013 - ey - us · global total 160 100.0% 18,246.9 100.0% q3’13...

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