Global Initial Public Offering (IPO) activity is up 1 percent by capital raised and down 42 percent by deal volume so far in first-quarter (Q1) 2013 (118 IPOs, raising $18.2bn in proceeds), compared with Q1 2012 (204 IPOs raising $18bn in proceeds), according to Ernst & Young’s Global IPO update.
Ernst & Young’s Global IPO pipeline analysis also indicates that an additional 31 IPOs are scheduled before the quarter’s end and should raise an additional $5 billion.
The largest deal so far this quarter was the listing of a US pharmaceutical business (carve-out), Zoetis Inc for $2.6 billion. Globally, there were five IPOs raising over $1 billion, compared with only one in Q1’12 and nine in Q4’12. Average deal size increased 75 percent to $154 million, compared with $88.2 million in Q1’12. Two IPOs have been postponed and 15 withdrawn in Q1’13, compared with two and 51 IPOs, respectively for Q1’12.
Maria Pinelli, Ernst & Young’s Global Strategic Growth Markets leader, comments: “Q1’13 posted strong results compared to activity this time last year. The pipeline is robust and we are aware of a minimum of 300 new companies globally that are actively preparing to list in 2013. In addition, institutional investors have returned to the IPO markets as an asset class, with more than 82 percent investing in IPOs in 2012, compared to only 18 percent who last invested in 2010 and 2011, as evidenced in a recent Ernst & Young’s study of institutional investors.”
In Q1’13, US stock exchanges have so far raised $6.7 billion from 24 IPOs, accounting for 37 percent of global capital raised this quarter and making the US the most active region globally. Capital raised was up 4 percent compared to Q1’12 ($6.4bn from 41 IPOs). If the additional $1.2 billion via eight IPOs in the pipeline for the remainder of March is successful, the US will be on par with Q4’12 ($8.9bn from 33 deals).
In March, the Dow Jones Industrial Average reached its highest point since October 2007. With macro-economic conditions also improving, this means that market sentiment in the US is very positive. Strong momentum is expected for the US IPO market for the rest of 2013, provided that stable macro-economic conditions exist: a concern for investors.
Real estate, life sciences, technology and oil and gas will lead the US IPO markets and these industry sectors account for more than 50 percent of the US IPO pipeline.
In Q1’13, European stock exchanges have so far raised $2.7 billion from 15 IPOs (accounting for 15% of global capital raised this quarter). Europe contributed the second largest IPO globally, the real estate company, LEG Immobilien AG from Germany which raised $1.5 billion. Ernst & Young’s Global IPO pipeline analysis indicates there are an additional 11 IPOs with expected proceeds of $2 billion to price before the end of March.
If successful, this will increase capital raised by 68 percent compared with Q1’12 (39 deals raised $2.9bn). IPO activity in Germany, UK and the Nordics is particularly active. Other parts of Europe are not expected to recover until the second half of 2013.
Pinelli further comments: “Cash strapped governments will likely seek capital through initial public offerings of state-owned enterprises in 2013. In addition, new government initiatives to foster market access for fast-growth firms and entrepreneurs will also be important for the remainder of 2013.
“This combination of a supportive regulatory environment, together with strengthening market indices, mean conditions have improved significantly for the region. However, the Eurozone’s political and economic difficulties are casting a shadow across the capital markets.”