Listings worth $8 billion lined up in IPO flurry
Europe's initial public offering market is on track for its busiest start to the year since the financial crisis as private equity companies seek to capitalize on demand from investors hungry for more exposure to the region's recovery.
The private equity backers of ISS, the Danish outsourcing group and Poundland, the UK discount retailer, on Tuesday announced their intention to float the companies in Copenhagen and London, just a day after GTT, the French engineering group, said it would seek a listing in Paris. Together they are seeking to sell more than $2.3 billion worth of shares. Pets at Home, the UK pet shop chain owned by KKR, is expected to follow suit in the next few days.
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The moves mean more than $8.3 billion worth of European IPOs are being marketed, on top of the more than $3.2 billion of flotations that have priced since the start of the year, according to data compiled by Dealogic. If all the IPOs go ahead as planned, the first quarter of 2014 will be the strongest start to the year since 2007.
Gareth McCartney, head of equity syndicate at UBS in Europe, said: "Activity is picking up because markets are buoyant with attractive valuations and market conditions are expected to remain good."
The flurry of offerings comes as market sentiment has sharply improved on hopes that Europe has shrugged off the debt crisis. IPOs have reflected the patchy international recovery since the financial crisis. Flotations quickly recovered in Europe, the US and Asia in 2010, after slumping to low points in 2009, but Europe's IPO market nosedived again in 2012 because of renewed market turmoil.
The performance of last year's IPOs has also whetted investor appetite. Shares in private equity-backed companies listed last year rose 25.3 per cent globally, according to EY. They were up 10 per cent in Europe.
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"There's a lot of cash on the sideline and IPOs have made money for investors last year, so demand should continue to be there," said Fotis Hasiotis, who advises private equity clients at Lazard.
Private equity groups, which struggled to return cash to investors in the wake of the financial crisis, have been quick to take advantage of the renewed demand for equities.
However, bankers predict that this year could see some more questionable companies come to market, as private equity groups exploit the buoyant environment to offload lower-grade assets.