Private equity-backed IPOs are trading on average 43.9 per cent above their offer price compared to 26.6 per cent for non-private equity flotations, according to new research published by the BVCA in association with PwC.
The report provides a historic analysis of private equity-backed IPOs in the UK between 1 January 2009 and 31 December 2017 and compares them with businesses that floated in the same period that were not backed by private equity.
It shows that the UK IPO market has been dominated by private equity since the financial crisis, reaching a peak in 2015 when private equity-backed debuts represented almost 70 per cent of the number of companies listing and almost 90 per cent of the value.
According to the report, one year after listing, private equity-backed flotations record an average performance of 22.6 per cent up on their offer price, compared to 20.3 per cent of non-private equity IPOs. The average time between the date of investment and the IPO meanwhile, ie the hold period, is 5.2 years, while the average performance relative to FTSE All Share indices between 2009 and 2017 is 24 per cent for private equity IPOs and minus 1.5 per cent for non-private equity flotations.
In addition, in 2017, 15 per cent of private equity-backed IPOs had been invested 10 years or more after the initial investment, the highest proportion in the research, while the top 10 UK private equity IPOs raised 37 per cent of all private equity proceeds between 2009 and 2017.
Consumer services has produced the largest number of IPOs and the highest proceeds of any sector, with 33 companies raising GBP10.8 billion; financials come second with 21 listings raising GBP5.9 billion.
Noelle Buckley, Director of Research at the BVCA, says: “What this research shows is the positive impact private equity has on the UK public markets and, most importantly, demonstrates how well private equity-backed businesses have performed after they have floated. The aim of investors is to improve the business over the lifetime of the investment so that by the time it comes to sell the equity stake, the company is in better shape than it was. This report provides ample evidence to support this.”
Mark Hughes, Partner, UK Capital Markets Leader, PwC, says: “In the last two years we have seen private equity IPOs reduce as a proportion of the overall IPO activity as the private sale route has won out over the public markets. Notwithstanding that, private equity remains a key driver of the London IPO market and investors remain attracted to the quality of private equity backed issuers.”