Mon, Sep 1, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Private Equity Strategies

Data Snapshot: Institutional Appetite for IPOs Up

Friday, March 22, 2013

By: Bailey McCann, Private Equity Strategies

According to a new Ernst & Young survey, investors cite brighter earnings, improved macro-economic conditions and more stable equity markets as the reasons for the improved market sentiment. Private Equity Strategies spoke with the author of the survey, Maria Pinelli, Global Vice Chair of Strategic Growth Markets at Ernst & Young, about the results and what that could mean for the IPO market this year.

Some 4 out of 5 institutional investors invested in an IPO last year, that’s up from only 1 in 5 in the past two to three years. This data is especially notable in light of the high profile failure of the Facebook IPO last year. This trend is expected to continue throughout 2013, although Pinelli notes that companies are going to have to make a significant effort to stand out, as it is a buyers market.

“The price has to be right, the terms have to be exactly right and the management team has to be right, for a company to see investment in this buyers market,” Pinelli tells Private Equity Strategies.

Earnings outlooks are critical, according to the survey, “Investors in almost every region rank a brighter earnings outlook as the key driver for improving IPO market sentiment. “ In Asia, confidence is particularly strong as both private equity and venture capital are looking for opportunities in this market - and there are many deals to be had. Companies may find it difficult without strong numbers, and a core differentiator to break out ahead of what is a considerable opportunity set.

In North America, it may be slightly easier for companies as investors are looking more closely at stabilization of macroeconomic factors before investing. Companies may be able to benefit if Congress moves toward a budget agreement. Report data shows that as these decisions are made and the overall financial landscape in the US becomes clearer, investor sentiments are likely to fall in line with the rest of the world - meaning North American investors will too be in the market for deals.

Good quality companies have generally been able to be successful in the IPO market. However, the survey shows that now more than ever, even good companies will have to take careful consideration of factors including market timing, and picking the right point in the lifecycle. “We have seen companies that rush to go public, or fail to take into consideration all of the appropriate factors come away unsuccessful. Recovery from something like this can be considerable,” Pinelli says.

She says that companies need to ensure that they have a solid infrastructure in place before going to market. Data in the survey shows that a number of companies that list too early also tend to have holes in infrastructure areas like reporting, corporate governance or compliance. Nearly one third of investors in the survey cited a strong corporate infrastructure as one of their core concerns.

“Investors want to see quarterly reporting, they also want to have transparency and know that a company is going to deliver on their promises,” Pinelli says. “It’s impossible to predict everything, but surprising investors can cause a significant drop in market value and it can take up to three years to regain that credibility with the public.”

*Image Source: Right team, right story, right price - Survey - By Ernst & Young

 
This article was published in Opalesque's Private Equity Strategies our monthly research update on the global private equity landscape including all sectors and market caps.
Private Equity Strategies
Private Equity Strategies
Private Equity Strategies


Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing
  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Study shows what resonates with investors: 'Unwavering', 'passionate' beats 'committed', 'dedicated' and more surprises[more]

    Komfie Manalo, Opalesque Asia: A new study by Pershing Square, a unit of BNY Mellon company, showed that an effective value proposition strengthens audience connections and fosters growth, yet many advisors have had little objective guidance in formulating such statements until now. In the

  2. Comment – Why you should avoid the hottest hedge fund hands, Swedroe attacks Hussman over risk management, relative value strategy[more]

    Why you should avoid the hottest hedge fund hands FromCNBC/Yahoo.com: Investors who don't have money with Pershing Square Capital Management are likely salivating at the hedge fund's industry-leading 26 percent return from January through July. But investing with Bill Ackman and other to

  3. Hedge fund assets decline in July - eVestment[more]

    Bailey McCann, Opalesque New York: Total assets in hedge funds declined in July and dropped 0.49%, marking the industry's second monthly asset decline in 2014, according to the latest asset flows data from eVestment. Despite the asset decline, total industry AUM remained above the $3 trillion

  4. AIMA makes 'the case for hedge funds'[more]

    Bailey McCann, Opalesque New York: The Alternative Investment Management Association (AIMA), the global hedge fund industry body,

  5. Managed futures' global diversification is important in next phase of economic recovery[more]

    Komfie Manalo, Opalesque Asia: The global diversification provided by managed futures may prove to be extremely valuable as the markets enter the next phase of the economic recovery, said Campbell & Company, a pioneer in absolute return invest