True to form, PE has taken advantage of good exit opportunities as they have emerged around the globe. This is helping to rebalance PE portfolios, which have aged steadily since the onset of the crisis. PE needs to increase the pace of exits still further if it is to work through its current overhang — there are now more than 12,000 portfolio companies owned by PE globally, according to Pitchbook. However, public market appetite for new issues was the big story for 2013. and continues to be strong into 2014. This should provide further opportunity for PE to release more of the capital tied up in some of its biggest deals that date back to the boom era.
In 2013, PE-backed IPOs had their strongest year on record, raising a total of US$58.5b, more than twice the amount raised in 2012. By the end of the year, 187 PE-backed IPOs had priced, compared with 110 in 2012. Overall, IPOs accounted for nearly one-fifth of all companies that went public globally (versus 10% in 2007 and just 6% in 2008) and 35% of the total proceeds.
The IPO resurgence in EMEA was particularly striking. In 2013, PE firms raised US$17.8b across 35 separate IPOs, compared with just 6 raising US$2.3b in 2012.
In addition, global PE-backed IPO performance has been strong, showing a strong 25.1% rise through mid-February 2014. As hold periods have lengthened, PE has intensified its focus on making operational improvements in the businesses it backs. This hands-on approach is starting to bear fruit as public markets investors respond with strong demand for PE-backed assets.
As we go into 2014, PE is filing for IPOs at an accelerated pace. At the beginning of the year, there were nearly 60 PE-backed companies in the IPO pipeline, with the potential to raise more than US$14b in total. Further IPOs have been announced since then.
Courtesy of EY