By Justin Cooper, CEO of Capita Registrars
There is only so long the IPO market can stay quiet. Private equity houses have a growing pipeline of investments they need to exit, so they can recycle their capital into new opportunities. The stock market has recovered, meaning that shareholders in private companies (particularly private equity backers seeking an exit) will get a better price at listing. A strengthening economy means they may need to raise new capital for expansion too, particularly since there are still constraints on bank lending, other sources of finance are hard to come by, or merely tap limited pools of capital (eg peer to peer lending). On current trends, we forecast that the new issues on the London Stock Exchange will hit £7.8bn by the end of 2013, an increase of 9% compared to 2012.
source: LSE data
The pipeline seems to be strengthening. We have recently seen a successful and decent sized IPO from the Renewable Infrastructure Group to set the ball rolling in Q3. With the privatisation of the Royal Mail on the cards in the second half of the year, proceeds raised from new shareholders in the second half of the year should comfortably outstrip those raised in the first half. The Royal Mail IPO will rank easily as one of the top ten IPOs of the last 15 years. As a result of this major IPO from a company incorporated in the UK, we should see the main market contribute £6.4bn, compared to £286m from AIM and £1.2bn from the international main market.
source: LSE data
While the market will still be a country mile from the heyday of 2006, or the last major swathe of major privatisations in the 1990s, business is picking up. 2014 should see the best deal flow in years. The number of deals will certainly rise next year, but Capita estimates the value of IPO deals will rise 50% in 2014, even with a Royal Mail flotation setting a relatively high base.