Bankers brace for Q4 rush as global equity markets rise
Bankers across the globe expect a string of large, high-profile IPOs during the rest of the year, on the back of strong equity markets and U.S. Federal Reserve policies that have driven an uptick in IPO activity.
Global equity fundraising is up 16.3 percent so far this year, boosted by low volatility, record U.S. market highs and a resurgence of capital markets in Europe and Asia.
The next few months could also see several notable initial public offerings from companies with global brand appeal, including micro-blogging network Twitter Inc, Chinese e-commerce giant Alibaba, hotel operator Hilton Worldwide and real estate investment trust Empire State Realty Trust.
"We think the fourth quarter will probably go down in the story books because there are a number of billion-dollar-plus, jumbo IPOs across different sectors," said Phil Drury, co-head of equity capital markets for the Americas at Citigroup . "Last year was all about small cap growth within tech and retail, but 2013 is actually the reestablishment of the jumbo IPO."
Global equity fundraising volumes, including IPOs and secondary offerings, totaled $524.4 billion year to date, up from $450.9 billion in the same period last year, according to preliminary Thomson Reuters data as of September 26.
The increase came amid a 29 percent rise in global IPO proceeds, excluding Facebook . A total of 467 companies worldwide have gone public so far this year, raising $85.3 billion, compared to a year ago when 540 companies raised $66.1 billion through IPOs excluding Facebook.
Bankers are encouraging companies that are considering public offerings to tap the markets sooner rather than later while the going is still good.
"Right now, we are telling issuers to go because there are some potential macro issues out there such as Syria and debt ceiling discussions," said Frank Maturo, vice chairman of equity capital markets at Bank of America Merrill Lynch. "Any macro issues could cause some short-term volatility in the market and you just don't know when those periods are going to occur."
A $3.9 billion IPO for Japanese beverage company Suntory Beverage & Food helped boost deal volumes this year, as did the $2.6 billion IPO for Pfizer Inc animal health spin-off Zoetis Inc.
Private equity firms also continued to sell companies from their portfolios as they looked to unload investments made during the buyout boom.
Private equity backed companies made up 40.2 percent of U.S. IPO proceeds so far this year, up from 20.9 percent during the prior period.
Large IPOs from private equity backed companies have included industrial distribution company HD Supply Holdings Inc , drug researcher Quintiles Transnational Holdings Inc and fragrance company Coty Inc .
Others expected later this year include retailers Burlington Coat Factory and the Container Store.
Goldman Sachs Group Inc topped the global ranking of equity underwriters so far this year, keeping its number one spot. JPMorgan Chase & Co came in second, followed by Morgan Stanley and Citigroup.
Goldman also topped the list of global IPO underwriters, followed by Morgan Stanley.
PICKUP IN EUROPE
Europe has seen a pickup in share offerings in 2013 as market confidence has improved and bankers working in the sector expect the remainder of the year to continue to be busy.
In Europe, even the usually subdued holiday period of August saw a string of equity capital market deals, including a 348 million pound capital hike by security services firm G4S , and the sale of a 10 percent stake in French electrical equipment supplier Rexel by its controlling shareholder.
"We've seen a busy summer. I've never seen so much activity in what people would normally consider a quieter period for deals," said Klaus Hessberger, co-head of Europe, the Middle East and Africa ECM at JPMorgan.
"Investors are moving back into 'risk on' mode to generate some returns," he said.
As bankers and investors returned to work in September, momentum has continued to pick up with a flurry of bloc sales including the British government raising 3.2 billion pounds ($5.1 billion) by reducing its stake in bailed-out lender Lloyds .
Other big deals already underway include an the initial public offering of Britain's Royal Mail, and a 5.95 billion pound ($9.5 billion) share issue by British bank Barclays .
Among those expected to go public in Europe in the final three months of the year are private-equity backed Merlin Entertainments Group, French cable operator Numericable and luxury down jacket maker Moncler.
"This is the first year in a while where we haven't had any big interruptions to activity from market volatility or big macroeconomic events," said Josef Ritter, co-head of equity capital markets for Europe, the Middle East and Africa for Deutsche Bank and head of the bank's ECM operations in Germany.
"We are now in a situation where there is expectation of good development in the US, recovery in Europe, less concern around China, and all that in combination with the delay in tapering has lead to a relatively benign environment for offerings," he said.
(Reporting by Olivia Oran in New York and Kylie MacLellan in London)