UK exchanges host increased number of IPOs as concern stabilises

19 December 2017 3 min. read

IPO activity in Europe has been buoyed by improving market conditions across the EU, although Brexit concerns remain an issue – finds new analysis into the quarterly activity in the space. Total value hit €3.8 billion, with the London exchanges recording their strongest relative performance in since the end of 2015.

Over the past two years, the Initial Public Offering (IPO) space has seen considerable ups and downs, as geopolitical uncertainties, concerns around valuation, and a drop-off in PE market exits resulted in a market slowdown. An IPO, or stock market launch, is a type of public offering in which shares of a company are sold to institutional investors, who in turn sell to the general public on a securities exchange for the first time.

As part of its quarterly research into IPO activity across Europe, PwC has released its ‘IPO Watch Europe Q3 2017’ report. The report covers recent trends as well as analysis, with the focus of the latest report being the future of the London exchange.

Quarterly European IPO activity

IPO numbers hit a recent peak in Q2 2017, both in terms of volume, 103, and value, at €15.6 billion. This was partly driven by companies in ‘wait-and-see-mode’ making their move. Q3 2017, meanwhile, saw a decline in volume and value – although in line with trends related to Q3 in previous years – in total there were 74 IPOs across the region, raising €8.2 billion. Overall, 2017 looks to outstrip the performance of 2016, as markets across Europe improve, and the uncertainty of Brexit resolves into a more familiar uncertainty.

While PE-backed IPOs saw relatively high levels of raised funds in 2015 and 2016, the latest quarters have been more subdued, particularly in terms of value. Q3 2017, saw the lowest value raised in more than 15 quarters, at €1 billion among five deals. It is worth noting, however, that third quarters have traditionally tended to be relatively slow for the sector. The PE market globally has seen exits drop, as excess stock that built up following the 2008 crisis has increasingly exited.

Quarterly value and volume

Commenting on the year so far, Mark Hughes, UK Capital Markets Leader at PwC, said, “We have seen European IPOs gathering momentum this year with money raised to date already above the €27.9bn raised in the whole of 2016. The year is set to finish on a high note with a number of high profile large IPOs set to launch in the coming weeks. However, with a number of companies undertaking dual-track processes, inevitably some of these companies may opt for a private sale process given the attractive valuations on offer.”

The London exchanges

Even amidst the continued uncertainty projected across the UK and the EU from Brexit talks, and the wider process itself, IPO activity on the London exchanges has seen room to improve. This year has seen a considerable increase in terms of value and volume so far, compared to the year previous, both in the main and the AIM exchanges.

In terms of value, Q3 saw around €2.5 billion in funds raised, around 27 IPOs. The AIM exchange recorded €0.7 billion in value and 15 deals while the main exchange recorded €1.8 billion in value across 12 deals. Deal activity was up from around €2 billion in the previous quarter across 24 deals on the exchanges.

London market IPO trend

Remarking on the deal activity in London, Lucy Tarleton, a Director in the UK Capital Markets Group at PwC, said, “London bounced back from the disappointing performance in Q3 2016 which was affected by the uncertainty and volatility arising from the UK’s EU referendum outcome. Q3 2017 was London’s most active third quarter by volume since 2011 when 29 IPOs raised €1.1 billion. Looking ahead, the pipeline looks promising for London IPOs, which includes a number of international companies. If favourable conditions continue, Q4 should deliver a strong end to the year.”