RCS - Millers Capital - European IPO Market Roars Back to Life

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03/06/2024 12:00

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RNS Number : 8675Q  Millers Capital  03 June 2024

European IPO Market Roars Back to Life: A Promising Start to 2024

The IPO market has roared back to life in 2024, showcasing its strongest start
since the 2021 boom. High-profile transactions involving companies like
Galderma, Douglas, Puig, and CVC have signaled a resurgence, setting the stage
for a robust year ahead.

Our analysis for the first quarter of this year highlights a notable recovery
in Europe's IPO scene, with nearly €5 billion raised in the first quarter
alone, according to S&P Global Market Intelligence. Private equity
(PE)-backed IPOs have been particularly influential, accounting for three of
the top five listings. This trend, along with a healthy pipeline, suggests a
sustained recovery through the year. While consumer and luxury sectors have
been prominent, the overall pipeline remains diverse. Let's explore the
factors behind this recovery and what the rest of 2024 might hold.

Drivers of Europe's IPO Resurgence

The past few years have been tumultuous, with economic shocks post-pandemic,
including geopolitical tensions and rising energy prices, leading to inflation
and synchronized interest rate hikes by central banks. These factors created
an uncertain market environment, widening the gap between investor and issuer
expectations.

By late 2023, however, optimism returned as macroeconomic conditions
stabilized. Declining energy costs, a rebound in global manufacturing, and
inflation trends nearing the European Central Bank's 2% target have bolstered
economic confidence. These developments have driven strong equity market
performance, with the STOXX Europe 600 reaching record highs. Additionally,
the volatility index has remained stable, supporting secondary equity markets.

These positive changes have rekindled investor confidence, paving the way for
a functioning IPO market. This renewed confidence, coupled with a backlog of
exit demand, has created an ideal environment for issuers and sellers.

Private Equity's Role in IPO Market Dynamics

Since 2021, macroeconomic challenges and rising interest rates have reshaped
the PE exit landscape. IPOs had taken a backseat as PE firms held onto
investments to avoid lower valuations, creating a backlog of maturing
investments. PitchBook data indicates that global PE assets under management
now exceed $5 trillion, highlighting substantial unrealized value.

The recent stabilization of equity markets has opened a window for more
PE-backed IPOs. As pressure to realize value mounts, we anticipate increased
activity in the IPO market for PE-backed assets. The overhang from 2021's
PE-backed IPOs will likely drive follow-on equity issuance in 2024 and beyond.

As Thomas Gallagher, Director of Private Equity at Millers Capital Investment
Pte Ltd., stated, "The resurgence of the IPO market provides an excellent
opportunity for PE firms to unlock value in their portfolios, which had been
on hold due to market volatility."

Global IPO Trends and Regional Variations

Globally, while Western IPO markets have reopened, IPO values in Q1 2024 were
down 6% compared to Q1 2023, primarily due to a 48% drop in the Asia-Pacific
region. Nonetheless, India's stock market continues to thrive, with $2 billion
in IPOs in Q1 2024. The Middle East has also shifted focus from oil and gas to
other industries, signaling a maturing market with broader appeal to
international investors.

The performance of IPO markets in Europe and the U.S. is heavily influenced by
global macroeconomic conditions, while regions like the Middle East and India
are driven by local factors such as domestic growth.

Looking Ahead: The Future of IPOs in 2024 and Beyond

Optimism abounds for Western IPO markets through 2024 and into 2025, supported
by a strong pipeline, robust market performance, lower volatility, and an
improved inflation outlook. Successful IPOs in Q1 have set a positive tone,
with a diverse range of issuers expected to support a vibrant IPO window in
the latter half of the year.

However, geopolitical uncertainties and upcoming elections could temper this
optimism. Innovation in IPO structuring, such as fixed-price offerings and
smaller free floats, alongside alternative funding mechanisms like convertible
instruments, will likely continue to evolve.

The London IPO market also stands at a pivotal point, with significant changes
to the UK listing regime aimed at increasing its attractiveness. Interest from
domestic and international companies suggests a favorable outlook for London
listings.

Strategic Preparation: Key to IPO Success

For potential issuers, readiness is crucial to capitalize on the IPO window.
The process, from strategic planning and readiness assessments to transaction
execution and pricing, can take up to 24 months. Companies are focusing on
improving their reporting environments, controls, and ESG disclosures to be
"fit for listing."

With ample investable cash available, quality and stock fundamentals are
paramount for IPO investors. Unlike the earlier boom driven by pre-revenue
tech companies, current listings must demonstrate solid profitability.
Planning for optionality, such as dual-track processes, can create tension in
price discovery and align expectations with historical valuation levels.

Conclusion

The European IPO market is clearly on the mend, with a strong start to 2024
and positive aftermarket performance. As we approach the second half of the
year, the market is expected to continue its recovery, contingent on the
persistence of favorable conditions.

Contact:

Millers Capital Investment Pte Ltd.

Website: www.millers-capital.com (https://pr.report/3A1nVRms)

Media Relations: media@millers-capital.com

Singapore Office

21 Bukit Batok Cres.

25-78 Wcega Tower

Email: info@millers-capital.com

Phone: +65 3159 2522

Luxembourg Office

65 Avenue De La Gare 1611

Phone: +352 2843 1117

SOURCE: Millers Capital

 

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