Strongest year for global PE-backed IPOs since 2007
Monday, 6 January 2014 00:00
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Global PE-backed IPOs raised $ 57 billion in 2013
European IPO window reopens with $ 17.6 billion in total PE-backed proceeds
Nearly 60 PE-backed companies in the pipeline to raise $ 14.0 billion
The year 2003 marks a significant return of global private equity-backed IPOs, which raised $ 57 billion, more than twice the amount raised in the same period last year. 2013 also marks the second highest total on record, since 2007, when PE firms raised $ 58.4 billion. Through 12 December, there were 181 deals completed, up 65% from just 110 deals for the full year 2012, according to Private Equity, Public Exits released today by EY.
Jeffrey Bunder, Global Private Equity Leader at EY says: “The strength of the IPO market is a welcome development for PE firms and their investors, who continue to hold many companies acquired during the 2006-2007 time period. Over the last several years, the IPO window has been extremely volatile – opening for short periods of time, and rapidly closing in response to the latest failed deal or macroeconomic challenge. Throughout, PE firms have diligently continued to operate and improve their portfolio companies as they awaited the optimal conditions for exit. That period may be upon us.”
Top three PE-backed IPOs
The top 3 PE-IPOs by capital raised were: Plains GP Holdings LP, which raised $ 2.9 billion on the New York Stock Exchange (NYSE); Hilton Worldwide, which raised $ 2.2 billion; and Antero Resources Corp ($ 1.8 billion on NYSE); Of the top 20 PE-IPOs, 11 were from the US, and 9 were from Europe.
Says Bunder: “Over the last several years, PE firms have become an increasingly important driver for the IPO markets. In 2008, PE accounted for 10% of global IPOs, while this year, companies backed by PE firms accounted for 31% of all proceeds.”
European PE-backed IPOs window reopens
The most significant development in 2013 was the return of Europe’s IPO markets. In 2012, there were just six PE-backed IPOs, which raised $ 2.3 billion in total. This year, PE firms raised $ 17.6 billion across 34 separate IPOs. Approximately one-half was raised in London; however, Paris, Frankfurt, Milan and Brussels all saw PE firms raise more than $ 1 billion in proceeds.
Bunder continues: “The return of the IPO market in Europe is a welcome development that underscores PE’s ability to create value in their portfolio companies. One of the challenges PE funds face is the large number of European portfolio companies that have been owned for over five years that will need to be exited in the near term. The opening of the IPO market provides a much needed exit alternative.”
Strong PE- backed IPOs after-market performances
Longer hold periods have enabled PE firms to spend more time effecting operational improvements in their portfolio companies, and public market investors are responding with strong demand for PE-backed deals. Year-to-date, PE-backed IPOs on average delivered a 13.0% first-day increase from their offer price and through 12 December, were up 18.6% above their offer price on a weighted average basis.
Financials top sector for PE-backed IPOs
Financial services and real estate ($ 11.7 billion) were the most active sectors, accounting for more than 20% of total PE –backed IPO proceeds. A recovering real estate market was a key driver – deals in the sector raised more than $ 5 billion in 2013, in 13 deals.
“Having emerged from the global recession and its aftermath, the real estate private equity sector is finally positioned for growth in 2014. A number of related companies outside the real estate sector also benefited from rising real estate prices – 14 companies in the building industry collectively raised nearly $ 4.5 billion during the year,” continues Bunder.
Pipeline could see 65 PE-backed companies raise around $ 18.2 billion
There are currently nearly 60 PE-backed companies in registration, expecting to raise more than $ 14 billion in total proceeds. PE firms are filing for IPOs at an accelerated rate. Some of the largest companies currently in the pipeline include Shuanghui International Holdings, (which was acquired by CDH China Holdings Management Co Ltd. and New Horizon Capital), Card Factory Ltd., acquired by Charterhouse Development Capital Ltd., and Lenta Ltd., which was acquired by TPG in 2011.
