Midlands shows “strong appetite” for IPOs
The UK IPO market has seen subdued levels of activity over the first three months of 2016, but Midlands businesses continue to demonstrate a strong appetite for IPOs.
In the first quarter of 2016 there were a total of 15 IPOs – nine on the Main Market and six on AIM – raising £1.65b. This compares to 13 listings over the previous quarter, raising a total of over £4bn of capital, according to EY’s latest IPO Eye.
Dom McAra, executive director in EY’s Transaction Advisory Services team in the Midlands, said: “The UK has experienced a slow start to 2016, brought about largely by market volatility, concerns regarding slowing economic growth and the uncertainty created by the EU referendum.
“Despite this, we have seen that well-priced businesses, often backed by PE, attract investor interest and deliver strong aftermarket performance. Equally, the pipeline for future listing is strong with companies targeting longer-term listing dates towards the final quarter of this year and beyond.
“What’s also encouraging is that, given the broader political and economic backdrop, London prevails as the leading market in Europe for IPOs. This quarter, the Main Market and AIM accounted for 45% of European listings and hosted two of the top five largest IPOs globally in 2016 so far.”
On the Midlands perspective, McAra said: “Despite the reduction in IPO funds raised so far this year, the appetite for IPOs is building in the Midlands and is firmly on the radar as a realistic option for an exit or as access to capital. However, there has been a reset of expectations in relation to timings with later this year or 2017 seen as more likely target dates for potential IPOs across the region.
“The performance of IPOs in London demonstrates that well-priced companies, with a capable management team, will continue to realise value and Midlands businesses are becoming increasingly aware of this. Confidence in IPOs is building in the Midlands and companies should be looking to capitalise on the opportunity when there is more stability in the market.”
Over the first quarter of 2016 PE-backed companies have again performed well in terms of raising capital on the Main Market and AIM. Of the 15 listings this quarter, three were PE-backed IPOs (Metro Bank plc, Countryside Properties plc and Ascential plc), accounting for 45% of the total capital raised. The continued strength of PE-backed businesses is cementing their prominence on the London exchange.
McAra said, “While the number of PE-backed IPOs in the coming quarters is likely to be significantly lower than the levels seen in 2015, we still expect them to be the drivers behind the majority of capital raised. The strong post-listing performance of PE-backed IPOs in 2015 is bolstering investor confidence in the markets and in these assets in particular.”
