PE-backed IPOs continued to be extremely active in 2014, with 211 total deals
Following a record performance in 2013, PE-backed deals put in another barnstorming performance in 2014, raising $109.9 billion across 211 separate IPOs, notes EY.
EY in its latest report titled: “Private Equity, Public Exits Q4 2014” points out PE investors are likely to continue focusing on exits in 2015.
Extremely active IPO market
According to the EY report, all exit routes were open for PE investors during 2014. PE firms sold stakes through trade sales, secondaries and IPOs in over 1,200 companies valued at $470.6 billion, which is a new global record. This also turned out to be a 70% increase versus 2013.
At this year's Sohn Investment Conference, Dan Sundheim, the founder and CIO of D1 Capital Partners, spoke with John Collison, the co-founder of Stripe. Q1 2021 hedge fund letters, conferences and more D1 manages $20 billion. Of this, $10 billion is invested in fast-growing private businesses such as Stripe. Stripe is currently valued at around Read More
During 2014, trade sales proved to be an active exit route. With corporate becoming more active in M&A, strategic acquirers began to bid far more aggressively for PE assets. The report notes as a result of these developments, the value of trade sales increased 84% in 2014 versus 2013:
As can be deduced from the above graph, IPOs as an exit route witnessed the largest increase over 2013. The EY report notes PE firms raised $109.9 billion across 211 separate IPOs, showing an increase of 89% by value and 14% by volume over 2013. Interestingly, last year US listing of Alibaba accounted for $25 billion of the total. The report highlights that apart from the Alibaba’s US listing, IPOs witnessed broad strength, as excluding the Alibaba issue, IPO proceeds still showed an increase of 46% over 2013.
Stressing the strong IPO performance, the EY report highlights that PE IPOs accounted for a record proportion of aggregate global IPO activity.
Moreover, considering the backlog of PE-backed companies and the subsequent increase in activity, PE is accounting for an increasing share of the overall IPO market. The strong performance was reflected even during the last decade, as PE deals averaged 20% of global value and 10% of volume. Moreover, in 2014, PE-backed companies represented 42% of value and 17% of volume.
PE-backed IPOs galore across regions
Turning its focus to regional performance, the EY report notes PE-backed IPOs posted strong performance across regions. It highlights that while the Americas witnessed an increase of 72% by value compared to 2013, in Asia-Pacific, proceeds jumped 180% by value. Maintaining the trend, PE IPOs in Europe, the Middle East and Africa also nearly doubled in both number (up 97%) and value (up 92%):
Furthermore, thanks to strong equities market and more PE-backed IPOs, follow-on deals posted continued strength. PE-backed follow-on activity saw a robust performance over the last two years. In 2013, follow-ons touched $108 billion; in 2014, PE-backed companies raised $104.6 billion in follow-on deals.
The EY report highlights that though all exchanges were strong in 2014, Australian listings notably witnessed 18 companies going public last year, raising $6.8 billion, with the Australian Securities Exchange averaging just three or four PE IPOs annually over the prior decade.
Highlighting the PE-backed deals’ strong performance in the secondary market, the report notes on a market-value weighted basis, PE IPOs posted an average of 6.1% on their first trading day and 8.1% through the end of the year. This compares well with the MSCI World Index of 23 developed countries, which posted 5.5% returns in 2014.