IPO Activity Levels Expected to Rise — Busy Year Ahead and Megadeals on the Horizon
Global IPO activity surged in 2017, making it the most active year since 2007. Year-to-date, 2017 has registered 1,624 IPOs with USD188.8 billion raised — an increase of 49 percent by number of deals and 40 percent by capital raised compared with 2016. But while these figures do not equal 2007 levels (1,974 IPOs, which raised USD338.4 billion), investors are anticipating a very active 2018 as markets return to their pre-crisis levels. These and other findings were released in the latest “EY Global IPO trends: Q4 2017.” EY is YPO’s Strategic Learning Advisor.
Martin Steinbach, Ph.D., EY Global and EY EMEIA IPO Leader, says, “2017 will close with more IPOs than any year since 2007. With this great momentum, IPO candidates are lining up for 2018. The outlook appears bright, driven by lower volatility across regions, high valuation levels and a renewed appetite for cross-border IPOs, particularly in the United States, Hong Kong and London, England, UK. A healthy global pipeline across a broad range of sectors and markets suggests IPO activity levels will be up with more megadeals, thereby increasing the global proceeds in 2018.”
Increase in IPO numbers in Asia-Pacific outpaces proceeds
Asia-Pacific exchanges saw a surge of 44 percent by deal numbers to 935 IPOs in 2017 after an exceptionally strong first half of the year. However, the pace of listings slowed in Q4 2017, which saw only 240 deals — a 4 percent drop on Q4 2016. Proceeds in 2017, at USD 73.2 billion, were only 0.2 percent higher than in 2016, reflecting the marked downward shift in average deal sizes. Exchanges based in Asia-Pacific took the top three rankings globally by deal number in 2017. Greater China exchanges saw 582 new listings in 2017 — a 68 percent increase on 2016.
Ringo Choi, EY Asia-Pacific IPO Leader, says, “Asia-Pacific saw rapid growth in IPO numbers in 2017 and cemented the region’s position as the world’s most active for new listings. But total proceeds have declined this year compared to 2016, due to noticeably fewer mega IPOs and higher number of smaller deals across the region. There was a thriving market in small-cap IPOs as far afield as China, Japan and Australia. We expect to see this trend continuing into 2018, with IPOs expected to rise in Hong Kong, Japan and the ASEAN region.”
Momentum in EMEIA is robust
EMEIA saw 469 deals raise USD64.0 billion in 2017, making the region second only to Asia-Pacific in terms of deal numbers and proceeds. Deal numbers increased by 50 percent in 2017 compared with 2016, while proceeds rose by 67 percent. Seventeen megadeals (with proceeds above USD1 billion) have raised USD28.7 billion, increasing the average deal size on the main markets by 45 percent to USD102.0 million in 2017. Reflecting the global trend, cross-border activity by proceeds saw a huge increase, accounting for 14 percent of IPOs in 2017 compared with 2 percent in 2016.
Emerging markets contributed strongly to overall IPO performance, with India’s Bombay and National exchanges recording a 74 percent increase in deal numbers in 2017. The Middle East saw a 256 percent increase in proceeds and a 179 percent increase in deal numbers over 2016, with Saudi Arabia continuing to lead the way.
“EMEIA IPO activity soared by number of deals and proceeds in 2017,” Steinbach says. “Looking to 2018, economic momentum remains robust. The Eurozone looks set to enjoy resilient growth and moderate inflation, while both India and the Middle East are enjoying economic reforms and a positive investment climate. Against this backdrop, the pipeline for EMEIA looks promising with a significant number of planned cross-border listings that reflect the strong confidence among issuers in the choices offered by EMEIA exchanges.”
Americas upbeat with activity across the region
There were 174 IPOs in the United States in 2017, raising USD39.5 billion, a welcome increase of 84 percent in terms of proceeds and 55 percent by volume compared with 2016. This meant that the Americas accounted for 13 percent of global deals and 27 percent of global IPO proceeds in 2017.
In 2017, the proportion of cross-border IPOs was the highest since 2010, accounting for 24 percent of U.S. IPOs by number of deals and 25 percent by proceeds. Five of the top 10 deals on U.S. exchanges in Q4 2017 were cross-border, which accounted for 61 percent by proceeds. Overall, three U.S. deals featured in the global top 10 deals of the year.
Jackie Kelley, EY Americas IPO Markets Leader, says, “Americas IPO activity ends the year on a high, driven by strong equity markets performance married with increased investor demand. In particular, a boost in cross-border listings on U.S. exchanges fueled this activity. As Brazil emerges from recession, issuers rushed to tap the market in the second half of 2017, while Canada experienced a rebound with nearly four times as many offerings this year compared with 2016. Overall, the Americas markets continue to exhibit strong market fundamentals and are expected to remain an attractive destination for companies looking to raise capital in 2018.”
2018 outlook: A busy year ahead with mega deals on the horizon
As the year comes to a close, a healthy pipeline of market-ready companies is growing as a result of lower volatility across regions, equity indices still hitting all-time highs and increasing investor confidence. Cross-border deals look set to remain a feature of the global IPO market in 2018, especially with exchanges in the United States, Greater China and London. This trend will help to support next year’s anticipated listing of the world’s largest oil company with more state-owned enterprise IPOs expected to follow across the Middle East and North Africa.
“Everything is in place for an exceptional 2018,” Steinbach says. “The stronger-than-expected turnaround in economic activity in the Eurozone has boosted expectations for global economic growth. All the major engines of growth in the global economy are now synchronized in an upward trajectory for the first time since the end of the global financial crisis.”