After the weakest first quarter (Q1) since 2009, Q2’16 reversed that trend with a resounding 120% upswing in capital raised to $29.6bn via 246 deals – up almost a third (29%) on the prior quarter.
A range of factors are creating a stop-start IPO market across the globe in 2016, according to the quarterly EY Global IPO Trends: 2016 2Q.
However, IPO activity at the mid-year point remains significantly below that of the same period last year. At 437, IPO volumes are 38% lower and at $43.0b, total capital raised is almost two-thirds (61%) down on 1H15.
Global IPO markets have been impacted by a complex and interlinked mix of factors this year, which has seen unprecedented political uncertainty on both sides of the Atlantic compounded by volatile economic and stock market performance in many regions of the world.
As equity markets stabilise toward the end of the year on the back of greater anticipated political and economic stability, companies that have deferred activity are likely to start emerging from full IPO pipelines globally.
In 2Q16, all major global regions reported substantial gains in terms of capital raised. Asia-Pacific was up 20%, EMEIA was up 187% and the US was up 755% – with the UK and Greater China the only major IPO markets to buck this trend.
Commenting on the global IPO market, Jackie Kelley, EY Americas IPO Leader, says: “Despite the substantial uplift in global IPO activity in the second quarter, there are still a large number of IPO-ready companies sheltering from continued volatility and waiting for much needed clarity on the global economic and political landscape. In the meantime, activity is slow but improving. The ready supply of private capital from PE firms will continue to support this pipeline of larger, more mature businesses waiting for the right time to come to market, particularly in the US.”
Financial sponsor involvement is a feature of a healthy IPO market in developed economies and 2Q16 saw participation of sponsors bounce back after a very muted first quarter.
Globally, there were 63 financial sponsor-backed IPOs raising $10.4b in 2Q16, accounting for 26% of global IPOs by number and 35% of capital raised. This is in contrast to 1Q16 when PE- and VC-backed IPOs accounted for only 16% of deals.
2Q16 also saw the return of the megadeal with six of the top ten IPOs in the quarter raising more than US$1b, with the largest IPO, Denmark’s state-owned DONG Energy, raising more than US$2.5bn.
Steinbach says: “We anticipate that the summer (3Q16) will, as normal, be quiet, but that we may have a much stronger second half of 2016. In an environment where investors are hungry to generate returns, and where IPOs globally are maintaining superior after-market performance, demand remains strong for good companies that are well led, well priced and that have a great equity story to tell. With the IPO pipeline continuing to fill, we would expect to see much stronger and more stable IPO activity in 2017.”
