EY: PE-backed IPOs reaches highest level in 16 years

14 January 2015 Consultancy.uk

The exit market in 2014 has performed well, data by EY shows, with the highest level since 2007. PE-backed IPOs was a popular strategy and reached the highest level in 16 years, numbers that suggest a recovering European private equity industry. EY expects this trend to continue, although it does not foresee the same level of PE-backed IPOs in 2015.

Recently released data* from professional services firm EY shows that the exit market performed well in 2014, with exit value of above €101 billion the highest since 2007 and only the third time it crossed the €100 billion mark. Especially private equity-backed initial public offerings (PE-backed IPOs**) proved to be a popular exit route. In the UK, exit activity reached a record of £28.8 billion, compared to £23.4 billion in 2013, and IPO value was the highest since records began at £16.2 billion.


Sachin Date, Private Equity Leader EMEIA at EY, explains: “PE-backed IPOs are at a record high since 1998 with 43 PE-backed IPOs worth €44 billion closing in 2014, as financial sponsors continue to capitalize on strong valuations.” Date continues: “The top 10 PE exits by value – five were IPOs, four were trade sales and only one was a secondary buyout. And if corporates were on the side-lines in previous quarters, this time around we are witnessing corporate activity picking up with values higher than before. The increased IPOs and trade sales values make up for the decrease in secondary buyout values.”

Sachin Date - EY

Looking forward
The trend suggests a recovering European private equity industry, which, according to the consulting firm, is likely to continue in 2015 - in line with progress made in the last two years. Private equity deal values are expected to increase in the next year with pending deals in the pipeline of around €20 billion in the coming months. The advisory, however, does not expect a large appetite for PE-backed IPOs to sustain in 2015. “It is likely that we will see less of PE-backed IPOs in 2015. But we expect to see more corporates buying and selling assets. Whether a strong pipeline will translate into a fully recovered European private equity industry is yet to be seen, but the signs are clearly encouraging.”

* The data has been released by the Centre for Management Buy-out Research (CMBOR), and is sponsored by EY and Equistone Partners.

** With an IPO, which refers to the first sale of stock by a private company to the public, the issuer receives assistance of a backing firm, for instance a private equity firm, which determines the price and best time to market the stock.