Flotations on the up

A new survey has found that 2004 saw increased IPO activity in all markets, particularly Asia, with a rise in the number of global flotations and capital raised for the first time since 2000.

Last year was a turning point for global initial public offerings (IPO) activity, according to the Ernst & Young Global IPO Survey 2005. The survey, the professional services firm’s second on this topic, found that both the number of IPOs and total capital raised rose in 2004 for the first time since 2000, and that IPO activity roughly doubled on the previous year.

The survey’s data was based on the location where companies were domiciled rather than where they were listed.

The report’s authors were also bullish about the prospects for the year to come. Gregory Ericksen, Ernst & Young’s global vice chairman, said in a statement: “Looking ahead there is a strong pipeline of companies that are ready to come to market, which is generating a sense of optimism for 2005.”

There is a strong pipeline of companies that are ready to come to market, which is generating a sense of optimism for 2005

Gregory Ericksen, global vice chairman, Ernst & Young

Earlier this week, US buyout firm KKR announced plans for its proposed flotation of German aircraft engine manufacturer MTU on June 6th. The float on the Frankfurt Stock Exchange could net KKR more than €300 million.

Last year 1516 global flotations raised a total of $124 billion (€99 billion), a figure not matched since 2000. Although the US remained the single largest market for IPOs, accounting for $35.2 billion of capital raised (28 percent of the global total), Asia drew level with the overall North American market, with both accounting for around 32 percent of capital raised.

The Asian market, which saw 721 IPOs raise $40 billion in 2004, was driven by growth in China, the third largest market last year, in which IPOs raised $12.5 billion of capital. India also saw strong growth last year, with the $2.9 billion raised representing a growth of 638 percent on 2003.

Asia also included the second most active IPO market last year, as Japan raised $12.9 billion of capital. Fourth on the list was Australia, where $7.8 billion was raised.

Europe raised $30 billion in 290 IPOs and accounted for 25 percent of the global market. Activity on the continent was driven by the UK, the world’s fifth most active market, where 191 deals raised $6.8 billion. Eastern Europe also saw increased activity, with activity in Russia increasing from one IPO in 2003 to six last year.

Other trends noted by the survey included the move towards dual or triple tracking, as companies looked simultaneously at IPOs, trade sales and private equity/venture capital funding rounds and the fact that regulatory changes, such as the implementation of the Sarbanes-Oxley Act in the US, have failed to deter activity.