Research by international law firm Pinsent Masons has found that the number of private equity backed IPOs increased by almost a third in 2017 compared to the previous year, from 16 to 21.
The firm also found that the GBP3.1 billion raised was more than double the amount raised in 2016 and represented 40 per cent of all new money raised in IPOs on the London markets last year.
In the report, which looks at the trends in private equity back IPOs, Pinsent Masons says that the IPOs of ContourGlobal and TI Fluid Systems were the two largest private equity backed IPOs in 2017. Furthermore these were two of the three most valuable stock market debuts by market capitalisation during the year, having initial market capitalisations of GBP1.67 billion and GBP1.17 billion respectively. The largest private equity backed IPO in 2016 was ConvaTec with an initial market capitalisation of GBP1.5 billion.
The research shows that eight of the private equity backed IPOs were on the Main Market and 13 were AIM IPOs. In 2016 the firm notes that there was an exactly even distribution across the two markets whereas this year’s cohort is weighted 62 per cent to AIM and 38 per cent to the Main Market.
Rosalie Chadwick, Head of Pinsent Masons Corporate Finance team, says: “The increasing numbers show that that an IPO can constitute a very successful exit for private equity investors and deliver high-quality companies into public ownership – a trend which we expect to continue.
“It was interesting to see an increase in AIM flotations –we have analysed private equity IPOs since 2013 and the historical trend shows that 74 per cent of private equity backed IPOs were on the Main Market so this year is unusual and may reflect an increase in confidence for the AIM market.”
In total, the report notes, there were 69 IPOS on the London Stock Exchange in 2017, compared to 60 in 2016. Three sectors featured the greatest number of total 2017 IPOs: financials (18), consumer goods and services (16) and industrials (16).
Chadwick adds: “The outlook for 2018 for both IPOs generally and IPOs of private equity backed companies is good – but time is of the essence for companies that have been considering a flotation. As the referendum on EU membership neared in 2016, IPO candidates moved to hit an execution window in the early summer. We are likely to see a similar trend this year as companies seek to float in the early summer before the typically less busy late summer period which, in 2018, will be followed by a fourth quarter where investors are likely to be nervous in the face of Brexit.”