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

02 May 2017

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.”


8 tips for successfully buying or selling a distressed business

18 April 2019

Embarking on the sale of a business is one of the most challenging experiences a management team can undertake. Even serial dealmakers acknowledge that the transaction process can be gruelling, exposing management to a level of scrutiny and challenge through due diligence that can be distinctly uncomfortable.

So, to embark on a sale process when a business is in distress is twice as challenging. While management is urgently trying to keep the business afloat, they are simultaneously required to prepare it for scrutiny by potential acquirers. Tim Wainwright, an experienced Transactions Partner with Eight Advisory, says that this dual requirement means sellers of distressed businesses must focus on presenting their business in a way that supports buyers in identifying value, whilst simultaneously being open about the causes of distress. 

According to Wainwright, sellers of distressed businesses should focus on eight key aspects to ensure they are as well prepared as possible:

  • Cash: In a distressed situation cash truly is king. Accurate forecasting and day-by-day cash balances are often required to ensure any buyer is confident that scarce cash reserves are under proper control. 
  • Equity story and turnaround plan: Any buyer is going to want to understand the proposed turnaround strategy: how is the business going to enact its recovery and what value can be created that means the distressed business is worth saving? Clear presentation of this strategy is essential.
  • The business model: Clear demonstration of how the business model generates cash is required, with analysis that shows how financial performance will respond to key changes – whether these are positive improvements (e.g., increases in revenue) or emerging risks that further damage the business.  Demonstrating the business is resilient enough to cope with these changes can go a long way to assuring investors there is a viable future.
  • Management team: As outlined above, this is a challenging process. The management team are in it together and need to be consistent in presenting the turnaround. Above all, the team needs to be open about the underlying causes that resulted in the distressed situation arising.  A defensive management team who fail to acknowledge root causes of distress are unlikely to resolve the situation.

8 tips for successfully buying or selling a distressed business

  • Financing: More than in any traditional transaction, distressed businesses need to understand the impact on working capital. The distressed situation frequently results in costs rising as credit insurance becomes more difficult to obtain or as customers and suppliers reduce credit. Understanding how these unwind will be important to the potential investors.
  • Employees: Any restructuring programme can be difficult for employees. Maintaining open communications and respecting the need for consultation is the basic requirement. In successful turnarounds, employees are often deeply engaged in designing and developing solutions. Demonstrating a supportive, flexible employee base can often support the sale process.
  • Structuring: Understanding how to structure the business for the proposed acquisition can add significant value. Where possible, asset sales may be preferred, enabling buyers to move forward with limited liabilities. However, impacts on customers, employees and other stakeholders need to be considered.
  • Off balance sheet assets: In the course of selling a distressed business, additional attention is often given to communicating the value of items that may not be fully valued in the financial statements. Brands, intellectual property and historic tax losses are all examples of items that may be of significant value to a purchaser. Highlighting these aspects can make an acquisition more appealing.

“These eight focus areas can help to sell a distressed business and are important in reaching a successful outcome, but it should be noted that it will remain a challenging process,” Wainwright explains. 

With recent studies indicating that the valuation of distressed business is trending north. With increased appetite from buyers who are accustomed to taking on these situations, it is likely that more distressed deals will be seen in the coming months. “Preparing management teams as best as possible for delivering these will be key to ensuring these businesses can pass on to new owners who can hopefully drive the restructuring required to see these succeed,” Wainwright added.