Ernst & Young

May 27, 2005 08:01 ET

Global IPO Activity Reaches Important Turning Point; Emerging Markets Dominate; Many More Companies Dual Track Says Ernst & Young's Global IPO Survey 2005

LONDON & MONTE CARLO--(CCNMatthews - May 27, 2005) -

2004 was a important turning point for IPO activity around the world with a rise for the first time since 2000 in both the number of IPOs and the total capital raised, a survey by the leading professional services provider Ernst & Young has found.

The Ernst & Young Global IPO Survey 2005, launched today in Monte Carlo ahead of tomorrow's Ernst & Young World Entrepreneur Of The Year Award ceremony, found that IPO activity roughly doubled over the previous year. The emerging markets continued to dominate activity, especially the Asia-Pacific region, with Japan, China and Australia all ranked in the top five countries by total capital raised in IPOs in 2004.

Highlights of the survey include:

-- 1516 deals and $124bn of capital were raised worldwide which, leaving aside the bubble years of 1999 and 2000, were figures last matched in 1997.

-- In Asia there were 721 IPOs, raising $40bn, fuelled by Chinese growth. Chinese companies often partook in foreign transactions, particularly in Hong Kong, the US and Singapore.

-- India saw a 638% increase in total capital raised compared to the previous year.

-- Australia and New Zealand, with 185 IPOs, raising $8.4bn, accounted for 12% of global deals and 5% of the total capital raised worldwide.

-- In North America $39.7 billion was raised in 286 IPOs, representing an increase of 285% in the number of deals, and 286% in the total capital raised.

-- In Europe, $30bn was raised in 290 IPOs. The main centre of European IPO activity was the UK with 191 deals raising $6.8bn.

-- Eastern European markets saw increased activity - Russia carried out six IPOs raising $859mn in 2004, compared with just one the year before.

A real sense of optimism

"The bulk of last year's IPOs tell the story of established companies with strong cash flow and growing profits going to market to raise money for expansion," Gregory K. Ericksen, Ernst & Young's Global Vice Chairman Strategic Growth Markets said. "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. Those companies are considering a number of options, be it IPO, a trade sale or venture capital/ private-equity round."

"Significantly, while the emerging markets had a very strong showing, all regions shared in the increase in IPO activity for the first time in many years, and the range of companies involved was similarly broad, ranging from Australian biotechs through Greek shippers and Russian miners to European and US technology companies and bricks and mortar," Ericksen continued.

"This diversity is mirrored by the business leaders gathered here in Monte Carlo for the Ernst & Young World Entrepreneur Of The Year Award, and reinforces the fact that IPO is an important growth stage for any company wanting to establish itself as a significant player, anywhere in the world."

Increasing numbers of companies dual track

The Ernst & Young survey indicates that 2004 saw increasing numbers of companies dual or even triple tracking - simultaneously preparing themselves for an IPO, a trade sale or venture capital/ private-equity round, depending on the balance of advantage. This is another reflection of confidence, according to David Wilkinson, Ernst & Young Partner and IPO Leader, UK. "Every company these days is advised to have a plan A, B and even C," Wilkinson noted.

"Very few companies are not dual tracking, with venture capital or private equity as an alternative. There has been growing activity by private-equity houses in US, UK and Australia, outbidding public markets for companies or buying up fledgling companies and taking them to IPO themselves."

Regulatory changes fail to deter IPO activity

Regulatory changes such as the implementation of the Sarbanes-Oxley Act and the conversion to IFRS have failed to deter IPO activity, as many companies still want to list in the US while others have decided to list elsewhere. "Domestic activity in the US, which alone raised one-third of all last year's capital, continued to rebound," Jackson Day, Ernst & Young Global Director of Capital Markets, said. "While most observers accept that some foreign firms in Europe and Australia have been put off from a US listing by the regulatory climate, others have decided that there is an advantage in testing themselves against the toughest regulatory regime in the world."

But it is not just in the US that there have been changes. In short, change is everywhere, and it is not about to stop. "The US was first, but there are also major reforms going on in China, Japan and Europe," Day observed. "I think it's the general view of the security regulators that if this is a global market, then they need to work together - not just on financial reporting but on oversight of the accounting profession, and that's going to drive more changes still."


About the Ernst & Young Global IPO Survey 2005

The Ernst & Young global IPO survey presents a review of activity and trends in 2004, an outlook for 2005 from a variety of perspectives, and a look at issues of concern to companies planning an IPO today. This is the second global IPO report produced by Ernst & Young, driven by the needs of companies planning an initial public offering in markets around the world. Data on companies in the report is based on the location where they are domiciled, rather than listed.

About Ernst & Young

Ernst & Young, a global leader in professional services, is committed to restoring the public's trust in professional services firms and in the quality of financial reporting. Its 100,000 people in 140 countries pursue the highest levels of integrity, quality, and professionalism in providing a range of sophisticated services centered on our core competencies of auditing, accounting, tax, and transactions. Further information about Ernst & Young and its approach to a variety of business issues can be found at Ernst & Young refers to all the members of the global Ernst & Young organization.

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