Global IPO fundraising plummets 45% to US$156b in 2011

And the largest IPO in Asia this year was the US$5.5b listing of Hutchison Port Holdings on the Singapore Exchange.

After a promising start in the first two quarters, IPO activity dropped dramatically midway through the year, principally due to investors concerns about sovereign debt issues in Europe and Standard & Poor’s downgrade of US credit rating. According to Ernst & Young’s report, year to date, the capital raised globally is down by 45%, with US$155.8b, and the number of deals is also down by 20% (1117 IPOs), compared to full year 2010. Seventy-two percent of global capital was raised in the first 6 months of the year.

However, 2011 fundraising activity still exceeded 2009 by more than US$40b, according to Ernst & Young’s year-end Global IPO update. The report predicts that the value of IPOs by year-end for 2011 will be approximately US$170b.

Maria Pinelli, Global Vice Chair Strategic Growth Markets for Ernst & Young says: “The uncertainty around a resolution to the Eurozone debt crisis and its impact on the global economy has left investors and issuers with a lack of confidence.”

Asian flotations down 56% by value
Asian exchanges completed 543 deals in the first 11 months of the year raising US$77.7b, a 56% drop in capital raised compared to full year 2010 (US$177.6b). The largest IPO on Asian exchanges this year was the US$5.5b listing of Hutchison Port Holdings on the Singapore Exchange, followed by Italian fashion house Prada SpA, for US$2.5b on Hong Kong Stock Exchange.

The HKEx raised US$19.6b in 53 deals, while the Shanghai and Shenzhen Stock Exchanges raised US$40.8b in 262 deals altogether.

Max Loh, Country Managing Partner, Ernst & Young LLP says: “Asia has been a key driver of the IPO resurgence as the global economy emerged from recession. In 2010, Asian exchanges led the world in bringing new companies to market, and this trend continued in 2011. With the continued need for capital to fund expansion, we have seen a higher proportion of private enterprises in Asia wanting to go public. Asian exchanges led by China, Hong Kong, South Korea and Singapore will continue to be attractive platforms for IPO aspirants.”

PE-backed IPOs
2011 saw the largest PE-backed IPO ever with the US$4.3b IPO of America’s largest hospital chain operator, HCA Holdings Inc in March on the New York Stock Exchange (NYSE). Globally, PE-backed IPOs companies exited 168 companies, raising around US$37b. Seventy companies raised US$31.4b in the first six months of 2011, putting the industry on pace for its best year on record.

However, issuance reversed its course midway through the year, as investor slowly started to lose confidence in the capital market. Despite the challenging environment, pricing generally improved for PE-backed deals compared to 2010, resulting primarily from a number of large deals that took advantage of the wide-open window in the first quarter of the year. Overall, PE-backed deals have accounted for 24% of the global proceeds raised in 2011, the highest percentage on record.

Jeff Bunder, Global Private Equity Leader at Ernst & Young says: “Moving into 2012, the outlook remains heavily dependent upon a stabilization in Europe, accelerated growth in the US and improved investor confidence in Asia. With PE portfolio aging rapidly, sponsors are looking closely for any indication that the IPO window is reopening.” Currently, there are more than 95 companies registered to go public, which in aggregate could raise more than US$20b.

“In a new normal, where volatility in public equities markets and in the global economy are constant and expected, PE firms have become more nimble and are prepared for when the IPO window opens next,” concludes Jeff Bunder.

IPOs by sectors
The leading sectors by number of deals were materials (254), industrials (185 IPOs); and high technology (137). The following three sectors, out of 12, accounted for 47.3% of total capital raised: materials (US$28.0b), industrials (US$26.1b) and energy (US$19.7b).