Strong IPO performance for Europe in Q4 bodes well for 2011

The fourth quarter of 2010 was a strong quarter for Europe.  IPO values raised approximately €10 billion, four times the amount raised in the previous albeit quieter summer quarter, but nearly double the amount in the same period in the previous year.

Now, where did the activity come from? 

Well, London again led the way with some 49 IPOs raising €3.5 billion.  None of the deals were that large.  The largest transaction in London was the Russian company - mel.ru, which raised some €700 million.  There were some larger deals elsewhere in Europe, with 2 deals over €1 billion; one in Norway, and one in Denmark.  The largest transaction of the quarter was NL Green, Green Power, the energy company, which did a dual listing in Italy and Spain, and that raised some €2.3 billion.  So altogether the activity across Europe was pretty well spread across the exchanges - not just the large exchanges, but many of the smaller exchanges saw a good deal of activity.  So looking into 2011, certainly for Europe, there is now a bit of momentum that has built up, and I think with the markets more broadly, at pretty high levels the IPO market has always been a key indicator for the market more broadly, activity levels look pretty good. 

Despite the last quarter, however, Europe ended up in third place for the third year running, behind the US and China.  There are 2 real reasons for this.  The US and China both have what we call “mega deals”. In the US it’s the General Motors IPO, raising some €11 or 12 billion.  China had 2 very large deals - the Agricultural Bank of China and AIA, the insurance spin off from AIG, both of which were in the €14 -15 billion range.  Europe really had nothing of that size.  And the second real reason is the state of the European economy, which is really lagging behind both the US and of course China. 

So looking into this year, What are we going to see in China? 

Well, there are going to be 3 main sources of IPOs.  I think private equity backed companies.  We know there is a big pipeline of those.  They did try and bring some of those through in 2010 without success but I think some of the better ones will come in 2011 and indeed in 2012.  The second source will be privatisations.  European governments are pretty over borrowed right now.  They are looking for sources of cash.  Privatisations is one such source, and there will be some sell-offs of government owned businesses around the region, we expect in 2011.  And then the final source is emerging market IPOs.  We have still seen a trickle of those during the recession, but we think they will come back quite strongly.  Again, mainly in energy, mining, utilities, those sorts of sectors which investors are attracted by and the source of those companies will be places like Russia, Kazastan, Ukraine, India and possibly even China itself.