European IPO market remains flat in Q1 2017 at €4.5 billion

02 May 2017 Consultancy.uk

IPO activity in the European market has remained relatively subdue for the first quarter of 2017, even while global activity picks up steam. Total value raised stood at €4.5 billion, with financials the largest industrial segments for funds raised (€2 billion), followed by industrials (€1.7 billion). The European market is, according to a new study, likely to pick up into 2017 as companies - in wait-and-see mode - enter the market. 

he global IPO market has seen ups, and more recently downs, in recent years. Most recently companies considering an initial public offering have faced concerns about their valuation, as well as whether the current economic environment is supportive of their ambitions – particularly following the election uncertainty in the US and the consequences of the Brexit decision in the UK.

In a new report from PwC the consulting firm explores the IPO market in the EU, with additional focus on the UK market – in light of its strategic importance and the somewhat radical consequences of the decision to leave the EU’s market.

Global and European IPO activity

The firms analysis shows that globally IPO activity has jumped considerably in Q1 2017 compared to Q1 2016, with value up 154% to €31.5 billion. The result for the first quarter of this year is considerably close to the buoyant first quarters of 2015 and 2014.

In Europe the story has been somewhat more reserved however. IPOs for Q1 2017 were similarly low to that of Q1 2016, although gains of 28% were noted with the total raised coming in at €4.5 billion. The results were considerably lower than in Q1 of 2015 and 2014.

The UK, saw £1.8 billion in activity in Q1 2017, a 1a similar result to the year previous. Results were well below of activity in Q1 of 2014 and 2015.

Top raised funds by company and sector

The sector with the most active engagement in IPOs for the fist quarter of this year in Europe is financials, with €2 billion in deals or 45% of total deal value – although the large float of BioPharma represents a large portion of the value raised in the category. Industrials takes the number two spot, accounting for €1.7 billion in the region’s deals, and 38% of total deal value, while healthcare generated €0.5 billion in raised funds (12% of total funds raised).

In terms of the largest deals in Europe, Prosequr Cash SA was the largest, valued at €750 million. Neinor Homes SAU and BioPharma Credit came second and third respectively, with €709 million and €705 million respectively. Ocelot Partners and Aumann rounded off the top five, with values raised of €395 million and €218 million respectively.

Top exchange and success factors

Exchanges in London remain the biggest attractors of IPOs, totalling €2.1 billion. The Spanish BME index took second spot, with €1.5 billion raised, while the Nasdaq Nordic rounded off the top three. In terms of average raised funds on the difference exchanges, the BME average, according to PwC, was the highest at €730 million, followed by London on €151 million. The Nasdaq Nordic exchange saw average value of €57 million.

Rocio Fernandez Funcia Partner, Spain Capital Markets Leader at PwC, reflects, “After a difficult 2016 in which market volatility dampened IPO activity, resulting from the political crisis which gripped Spain, 2017 has jump-started the Spanish IPO markets. Q1 saw the sizable IPOs of Prosegur Cash and Neinor Homes. The conditions for IPOs in Spain are great, volatility is low and the IBEXXhas been on the rise since the start of the year. Should these conditions persist, the coming months will see more issuers coming to market."

European IPO activity in recent years

A more granular examination of the European IPO result for Q1, finds that IPO levels have, in terms of funds raised, returned to levels last seen between 2010 and 2013 – while IPO volume has stabilised somewhat. The large deals, which affected the totals raised in Q1 of 2014 and 2015, at €11.4 and €15.4 billion respectively, remain subdued.

Overall the research from the consulting firm finds that IPO activity has trended down over the past year- with both Q2 and Q4, which have tended to be relatively active during the recent boom years, returning relatively subdued results. Geopolitical fallout, as well as market factors related to the PE industry exiting stock and startups entering the public market during 2014 and 2015, may have skewed results – with the market itself returning to relative normality.

Remarking on future of IPOs within the wider European market, Lucy Tarleton, Capital Markets director at PwC, says, “While Q1 2016 was affected by political uncertainty and concerns over global economic growth, conditions this year have been more favourable for IPOs. Despite the lead up to the UK invoking Article 50 and the Dutch elections this quarter, the VSTOXX50 index, measuring market volatility, has remained low throughout the period. This combined with the low interest rate environment, and investors being keen to seek out and back IPOs with well supported compelling equity stories, means that a healthy pipeline of IPOs is beginning to emerge across the European continent.”

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