Global IPO activity in the second quarter (Q2) of 2015 picked up compared to the first three months of the year, up 61% by proceeds and 37% by deal number, but the IPO market in 2015 so far has been lackluster, especially in the US and Europe.
By the end of the first half of 2015, deal numbers had reached 631 IPOs, a 6% increase on the same period last year. However, at $103.7billion, total capital raised was 13% lower than during the first half of 2014, according to the quarterly EY Global IPO Trends: 2015 Q2.
Maria Pinelli, EY Global Vice Chair, Strategic Growth Markets, said:“Despite the cooling market, we do not believe the pattern of IPO activity in 2015 reflects a widespread lack of confidence among dealmakers. Instead, it reflects an ongoing pause for breath while entrepreneurs and managers evaluate the broad range of funding options currently available.”
“Reflecting the overall health of the funding ecosystem, IPOs are currently just one choice among a widening range of options to create and realize value. As M&A activity surges, we will see more companies choosing to keep their options open by pursuing a multitrack strategy assessing mergers, trade sales and the wealth of private funding options alongside more traditional IPO possibilities to deliver optimal value to shareholders.
A number of factors underpin this subdued activity. New listings this year in the US and Europe have not matched the overall pace of the first half of 2014; while the number of financial-sponsored IPOs worldwide has also dipped – there were 123 private equity and venture capital backed IPO deals raising $32.7billion in capital in the first half of 2015, down 38% and 48%, respectively, on the same period last year.
Globally, mergers and acquisitions (M&A) are soaring, providing an attractive alternative to an IPO listing – the monthly M&A deal value reached an eight-year high in April and May with 2,879 deals announced worth $399billion in April and 2,653 deals with announced and intended deal value over $400billion in May. Meanwhile, in some sectors (principally technology, which is generally an IPO stalwart) the private market has overtaken the public market. In 2015 so far, US venture-backed technology companies have raised just $1.8billion from nine deals through IPOs but $20billion through private offerings.
“Private capital is an attractive alternative to IPO, and there are now many more players looking to capture pre-IPO growth, from VCs, to hedge funds, growth capital investors and mutual funds,” said Pinelli, nothing that “this interest has given rise to the term ‘private IPO’ to describe IPO candidate companies accessing capital from private investors.”
