As we enter 2015, all eyes are on the London IPO market to see whether it can top 2014’s strong performance, and retain its status as one of the world’s capital markets of choice.
The revival of activity in the Square Mile in 2014 – the best year since 2007 – can largely be attributed to a growing sense of confidence amongst both companies and investors. Across the last 12 months, the London IPO market saw 58 companies joining the main market and 80 listing on AIM, raising £14.1bn and £2.6bn respectively. (Data from BDO).
UK equities performed strongly in the first half of 2014, indicating improving confidence in the economy, which was further reflected by the dominance of consumer companies coming to market. More than half of 2014’s IPOs were consumer goods and services companies, led by AA’s flotation in January, followed by high profile floats from Pets at Home, Card Factory, AO World and Poundland.
After getting off to a particularly strong start, the second half of 2014 was witness to a number of casualties and a noticeability dampened feeling in the market. Uncertainty around the Scottish referendum, as well as wider macroeconomic concerns certainly played a part, but concerns around market saturation and underwhelming aftermarkets resulted in investor uncertainty towards the end of the year, which meant that some companies had to shelve their plans.
Historically IPOs have provided companies with the capital to invest in growing their businesses, but in 2014 we saw that becoming increasingly less the case. A significant number of the largest deals were targeted at enabling existing investors to make an exit from their businesses, rather than raising new money. We anticipate that this trend is likely to continue into 2015, alongside increased levels of scrutiny from investors looking for value.
While a lot of unknowns lie ahead in 2015; market volatility and geopolitical concerns may derail market activity, and May’s General Election will almost certainly cause a lull in the market, the IPO market has already got off to a strong start, with a number of high profile floats announced, and significant media speculation about what the next few months will bring.
Chris Nicholls, Head of IPO and Equity Advisory at Deloitte, commented, “We expect investors to continue to view quality IPO stories favourably but see market volatility as the key concern that could impact the number of IPOs that get away.”
Will January’s positivity continue throughout the rest of the year? Only time will tell.
This post is authored by Joanna Crawford, Senior Account Manager, Cicero Group.
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