Transaction Services

2009                   US IPO watch
                       Analysis and trends

After a dismal performance in 2008, coinciding with the         2010 outlook
worst financial crisis the world ...
Top 10 IPOs
                                        A quote or synthesis of
Top 10 IPOs
                                                                                             IPO acti...
Top 10 IPOs
                                                                       Larger deals A quote or synthesis of
PricewaterhouseCoopers • 2009 US IPO watch                                                                                ...
Quarterly analysis
Top 10 IPOs
Industry analysis
                                                                                Technology expectations ...
PricewaterhouseCoopers • 2009 US IPO watch                                                                                ...
Financial sponsor-
backed IPOs                                                                              Pushing the IP...
PricewaterhouseCoopers • 2009 US IPO watch                                         9

Volume of financial sponsor-backe...
Non-US issuers
                                                                                Proceeds increase fourfold
Stock exchanges
                                                                                            US market shar...
Top 10 IPOs
PricewaterhouseCoopers • 2009 US IPO watch                                                                                ...
Greater China
Top 10 IPOs
PricewaterhouseCoopers • 2009 US IPO watch                                                                                ...
Top 10 IPOs
Latin America
PricewaterhouseCoopers • 2009 US IPO watch                                                                                ...
Top 10 IPOsthe US,
Europe, Greater China,                                                                       ...
Developments in capital
markets                                                              SEC focuses on corporate gove...
PricewaterhouseCoopers • 2009 US IPO watch                                                                            21

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2009 US IPO Watch


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Summary of 2009 IPO market activity.

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2009 US IPO Watch

  1. 1. Transaction Services 2009 US IPO watch Analysis and trends
  2. 2. Foreword After a dismal performance in 2008, coinciding with the 2010 outlook worst financial crisis the world has faced since the Great IPO activity has picked up significantly since the “frozen” Depression, the US initial public offering (IPO) market state of early 2009, riding the tide of improving equity began to rebound in 2009. IPO activity bottomed out in markets. During the fourth quarter, fifty-four companies the first quarter at the height of the credit market turmoil, registered for an IPO in the US, including several non-US when only two deals were completed. IPO activity picked issuers. up in the second quarter as markets began to stabilize, and the pace continued to accelerate through the rest of Although a recovery of the US IPO market has taken hold, the year. some companies pursuing IPOs are encountering chal- lenges. A few planned offerings were withdrawn in the Although 2009 was by no means a banner year for US fourth quarter of 2009, and five out of the seven IPOs IPOs, clear signs have arisen that an increasing number in December 2009 priced below expectations. Further, of companies across a variety of industries, both domes- companies completing successful IPOs that did not meet tically and internationally, are planning to tap the public post-IPO earnings expectations were punished severely. equity markets for capital during 2010. These facts highlight some of the risks associated with going public. Factors impacting IPO activity in 2009: Financial sponsor-backed transactions surge Companies planning IPOs in 2010 will need to estab- lish realistic expectations of their value and ensure they If 2008 was notable for the lack of financial sponsor- have the ability to meet near-term market expectations. backed IPOs, late 2009 saw a surge of these deals. Anticipating business risks and developing programs for Financial sponsor-backed transactions nearly tripled in managing such risks is a theme we are seeing resident volume and almost quadrupled in value in 2009 compared earlier in the IPO planning process… and rightfully so. with 2008. They also comprised more than half of all deals in 2009. Where do we go from here? Non-US issuers contribute We are optimistic that the US IPO market will continue to build on the positive trend of activity witnessed during Proceeds raised by non-US issuers also increased consid- the later part of 2009. While January and February are erably, representing 36.7% of total proceeds in 2009 often quiet, we expect substantial IPO activity prior to the compared to only 6.3% the previous year. Two of the top dog days of summer and robust deal flow throughout the 10 US IPOs in 2009 were from non-US issuers, including autumn. We foresee a continuing contribution of deals the largest IPO in 2009—Banco Santander (Brasil) S.A. from financial sponsors as private equity firms look to harvest investments made during the “heyday” of lever- Global IPO activity rebounds aged M&A activity that preceded the credit crisis. IPO markets around the world generally witnessed an increase in both volume and value in 2009. The Greater We expect IPOs from the technology sectors, including China market proved to be the largest IPO market in biotech, as well as financial services, healthcare and retail the world in 2009, where 208 IPOs raised a total of and consumer deals. Green energy/technology deals may $59.7 billion. be the “wild card” for 2010, depending upon how policy- makers elect to support a low-carbon economy. Sincerely, Scott J. Gehsmann Henri Leveque Transaction Services Transaction Services PricewaterhouseCoopers LLP i
  3. 3. Contents Top 10 IPOs A quote or synthesis of section if needed Overview 1 Top 10 IPOs 2 Quarterly analysis 4 Industry analysis 6 Financial sponsor-backed IPOs 8 Non-US issuers 10 Stock exchanges 11 Europe 12 Greater China 14 Latin America 16 Comparing the US, Europe, Greater China, and Latin America 18 Developments in capital markets 20 About PwC’s Transaction Services 22 ii
  4. 4. Overview Top 10 IPOs IPO activity makes a comeback A quote or synthesis of section if needed After the slowest year for IPOs since the 1970s, the US The financial services industry was the leader in terms IPO market began to show signs of life again in 2009. of both IPO volume and value in 2009. The largest IPO IPO volume increased moderately in 2009 to 69 IPOs, of the year came from the banking sector, with Banco compared with 57 IPOs in 2008. Proceeds of $25.2 billion Santander Brazil raising $7.0 billion. Business services were raised in 2009, compared with $29.4 billion and technology IPOs also boasted strong showings in 2008. However, total IPO proceeds during 2009 in 2009 with 11 IPOs each, raising $3.5 billion and and 2008 were skewed by single, large deals—Banco $2.8 billion, respectively. Santander (Brasil) S.A. (Banco Santander Brazil), which raised $7.0 billion in 2009 and Visa, Inc., which raised Financial sponsor-backed deals rebounded strongly $17.9 billion in 2008. Excluding these two large deals, in 2009, after coming to a standstill in 2008. For the year, IPO proceeds in 2009 and 2008 would have totalled 44 IPOs totaling $9.9 billion were backed by financial $18.2 billion and $11.5 billion, respectively. sponsors. In 2008, there were only 14 such IPOs, which raised $2.3 billion. During the fourth quarter of 2008 and through the first quarter of 2009, IPO activity came to a near halt, with An analysis of 2009 IPO activity based on capital raised only five IPOs over this six month period. However, as the reveals an increase in the number of deals in the $500 equity markets began to gain ground, IPO activity picked million to $999 million range and the $50 million to $149 up in each quarter of 2009. The fourth quarter witnessed million range. IPOs raising more than $500 million more 35 IPOs, a clear rebound from the first-quarter trough, than doubled in 2009 to 11, from five in 2008. IPOs of less although still not significant by historical standards. than $50 million declined from 11 in 2008 to seven in 2009. Offering value & number of IPOs by year Offering value (US$ billions) Volume of IPOs by range of offering values $65.1 2005 2006 2007 2008 2009 $1 billion + 2 8 7 2 3 $49.9 $39.1 $29.4 $500–$999 million 16 15 15 3 8 $25.2 Number of IPOs $150–$499 million 68 61 109 22 23 296 221 236 $50–$149 million 88 105 129 19 28 57 69 Less than $50 million 47 47 36 11 7 2005 2006 2007 2008 2009 1
  5. 5. Top 10 IPOs Larger deals A quote or synthesis of return to fuel proceeds section if needed “We expect the 2010 market for initial public offerings to be the strongest since 2007. A significant reduction in valuation volatility, year-over-year positive financial comparisons, and a stable overall business environment, are all factors that companies and investors look for in an IPO window. We have seen over 60 filings on the NYSE since the third quarter for over $20 billion in capital to be raised. Companies of all sizes and from a broad range of sectors will enter the market. However, it is not an IPO free-for-all, as investors are still valuation sensitive, and recent transactions that may have pressed the valuation envelope have seen poor performance. Execution will be key.” Scott R. Cutler, executive vice president and head of listings—Americas, NYSE Euronext Proceeds raised from the top 10 US IPOs totaled Verisk Analytics Inc., a New Jersey-based risk manage- $15.6 billion, versus $23.7 billion in 2008—although absent ment software company, which raised $1.9 billion in the Visa IPO, proceeds in 2008 would have been only proceeds. Non-US based companies accounted for two of $5.9 billion (see table on following page). The top 10 IPOs the top 10 IPOs and 51.8% of the top ten deal value, or comprised 61.9% of the total value of 2009 IPOs. $8.1 billion—$7.0 billion was raised by Banco Santander Brazil, while the remaining $1.1 billion was raised by Average deal size of the top 10 IPOs was $1.6 billion, Chinese gaming software company Shanda Games Ltd. compared with $0.7 billion in 2008 (excluding the Visa IPO). In 2009, one IPO dwarfed the remaining top 10: Financial services continued to be the leading sector in the offering from Banco Santander Brazil, which raised 2009, with three of the top 10 IPOs. $7.0 billion. All deals in the top 10 raised more than $500 million in proceeds compared to only five in 2008. Four of the top 10 deals in 2009 were backed by financial sponsors compared to only one in 2008. US-based companies accounted for eight of the top 10 IPOs but only 48.2% of the total deal value, or Seven of the top 10 IPOs were NYSE-listed transactions, $7.5 billion. The largest IPO from a US-based issuer was and the remaining three were NASDAQ-listed deals. 2
  6. 6. PricewaterhouseCoopers • 2009 US IPO watch 3 Top 10 IPOs 2009 (proceeds in US$ millions) Top 10 IPOs 2008 (proceeds in US$ millions) Banco Santander (Brasil) S.A.2 $7,035.0 Financial services Visa Inc. $17,864.0 Business services Verisk Analytics, Inc. 1,875.6 Technology American Water Works Company, Inc. 1,247.0 Utilities Shanda Games Ltd. 2 1,043.7 Technology Intrepid Potash, Inc. 960.0 Industrial Talecris Biotherapeutics Holdings Corp.1 950.0 Healthcare Trian Acquisition I Corp. 800.0 Financial services Hyatt Hotels Corp. 950.0 Leisure Sapphire Industrials Corp. 800.0 Financial services Cobalt International Energy, Inc. 1 850.5 Energy GT Solar International, Inc. 500.0 Energy Starwood Property Trust, Inc. 1 810.0 Financial services Maiden Holdings, Ltd. 1, 2 460.6 Financial services Mead Johnson Nutrition Co. 720.0 Healthcare GHL Acquisition Corp. 400.0 Financial services Dollar General Corp. 1 716.1 Consumer BPW Acquisition Corp. 350.0 Financial services Artio Global Investors Inc. 650.0 Financial services Colfax Corp. 337.5 Industrial Total $15,600.9 Total $23,719.1 1 Financial sponsors $3,326.6 1 Financial sponsors $460.6 % Financial sponsors 21.3% % Financial sponsors 1.9% 2 Non-US issuers $8,078.7 2 Non-US issuers $460.6 %Non-US issuers 51.8% % Non-US issuers 1.9% Value and contribution of top 10 vs. other IPOs Average IPO proceeds (US$ millions) (US$ millions) Top 10 Other IPOs All IPOs Top 10 Other 2009 $15,601 $9,607 $365.3 $1,560.1 $162.8 2008 $23,719 $5,632 $514.9 $2,371.9 $119.8 2007 $16,104 $49,045 $220.1 $1,610.3 $171.5 2006 $13,546 $36,396 $211.6 $1,354.6 $161.0 2005 $8,601 $30,510 $177.0 $860.1 $144.6 0% 20% 40% 60% 80% 100%
  7. 7. Quarterly analysis Top 10 IPOs Strong fourth quarter trendsynthesis of A quote or re-emerges section if needed The IPO market rebounded in the second quarter of 2009 with fourth-quarter IPO activity reaching new levels and after hitting bottom in the first quarter, which saw only two generating the highest quarterly proceeds since the first IPOs. The number of IPOs rose consistently thereafter, quarter of 2008. Offering value & volume of IPOs by quarter Offering value in US$ billions $22.6 $21.1 $20.4 $19.7 $17.1 $11.6 $10.9 $9.3 $9.8 $9.2 $10.8 $11.7 $11.9 $7.7 $1.5 $1.6 $5.1 $0.2 $0.7 $5.8 101 Volume of IPOs 89 79 67 68 54 57 54 56 43 48 37 35 25 11 12 20 18 3 2 2005 2006 2007 2008 2009 The fourth quarter of 2009 resumed the historical trend of Q4 comparison: Number and value of IPOs robust Q4 IPO activity, after a slow final quarter in 2008. Offering value in US$ billions $20.4 $19.7 The fourth quarter of 2009 delivered 35 IPOs that raised $16.4 $17.1 proceeds of $17.1 billion. This compares with only three $11.7 $10.4 $10.4 $9.2 IPOs in the fourth quarter of 2008 that raised a meager $4.5 $0.2 $0.2 billion. When compared with the fourth quarter of 2007, Q4 of 2009 was not particularly remarkable in terms Number of IPOs of the volume of IPOs. However, proceeds raised of 101 $17.1 billion in the fourth quarter of 2009 were only 89 89 16.1% short of the $20.4 billion raised during the market peak in Q4 2007. 55 56 57 37 35 27 3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 4
  8. 8. Industry analysis Technology expectations high “We continue to see a healthy pipeline of IPO applications from viable companies in the healthcare, technology, social media, and education sectors. 2010 is shaping up to be a better year than 2009, and we will benefit from a stronger first half— in 2009, we didn’t see any real momentum until April. NASDAQ OMX saw nine IPOs from China last year, and this will be a critical market in 2010 as Chinese companies continue to see the benefits of accessing US-based investors. While we are in what is being called a ‘jobless recovery,’ we will also see more venture capital-backed and private equity-backed IPOs, which will result in job generation.” Robert McCooey, senior vice president, NASDAQ OMX Group Financial services again proved to be the most active The industry mix of the leading 2009 IPOs stands in industry sector, constituting 18.8% of 2009 IPO volume, contrast to that of the 2008 leaders. While financial or 13 IPOs. The technology and business services sectors services was also one of the leaders in 2008, the clear followed with 11 IPOs each. 2008 leader in deal value was business services because of the Visa IPO. Other leading sectors in 2008 were In terms of the value of offerings, financial services was energy/utilities and industrial. While 2008 witnessed again the leader, largely because of the $7.0 billion Banco clean tech companies braving the IPO waters, 2009 was Santander Brazil deal. Financial services as a whole raised a slower year for “green” investment given the financial $10.5 billion, comprising 41.5% of the overall proceeds. crisis. Interest in renewable energy may resume in 2010, Business services was second in terms of deal value, depending largely upon oil prices and continued govern- raising $3.5 billion, or 13.9% of the proceeds. Technology ment support for the sector. and healthcare sector IPOs also had a strong showing in 2009, raising $2.8 billion and $2.7 billion, respectively, or 11.3% and 10.8% of the proceeds, respectively. 6
  9. 9. PricewaterhouseCoopers • 2009 US IPO watch 7 IPO proceeds across industry sectors Transport, Other, Financial Transport, Other, 1.6% 0.6% services, 3.8% 1.0% 16.6% Other, Transport, Business 4.2% 1.1% Healthcare, Business services, 0.8% services, 13.9% 9.6% Technology, Energy/ 0.9% Energy/ Utilities, Utilities, Financial 6.8% Financial 12.2% 2009 services, 2008 Industrials, 2007 services, 43.1% Consumer, 41.5% 5.6% Consumer, 7.6% 4.5% (Consumer, Industrials, 0.0%) Industrials, 2.3% 6.1% Business Energy/ Technology, Healthcare, services, Utilities, Technology, Healthcare, 11.3% 10.8% 63.9% 10.5% 13.8% 5.9% Value and volume of IPOs by industry sector Volume Value (US$ millions) 2009 2008 2007 2009 2008 2007 Financial services 13 22 97 $10,459.2 $4,885.3 $28,076.3 Business services 11 8 27 3,504.8 18,740.5 6,233.9 Technology 11 3 55 2,845.1 257.7 8,980.2 Healthcare 10 4 43 2,713.2 221.0 3,871.1 Consumer 8 1 13 1,918.4 2.9 2,908.6 Energy/Utilities 5 9 34 1,711.6 3,084.1 7,942.2 Other 2 1 2 1,061.1 189.0 682.3 Industrials 7 6 12 584.8 1,646.9 3,986.1 Transport 2 3 13 409.8 323.7 2,468.0 Total 69 57 296 $25,208.0 $29,351.1 $65,148.7
  10. 10. Financial sponsor- backed IPOs Pushing the IPO window open A quote or synthesis of section if needed After a relative absence in 2008, Value of financial sponsor-backed IPOs financial sponsor-backed IPOs (US$ millions) returned in 2009. Of the 69 IPOs Financial sponsors Others completed in 2009, 44 were backed by financial sponsors. These IPOs raised $9.9 billion. This contrasts with 2009 $9,878 $15,330 14 deals raising $2.3 billion in 2008. $2,327 The largest financial sponsor-backed 2008 $27,024 IPO in 2009 raised $950.0 million, compared with 2008, when the largest financial sponsor-backed deal 2007 $30,002 $35,147 raised only $460.6 million. Four of the top 10 deals in 2009 were financial 0% 20% 40% 60% 80% 100% sponsor-backed, compared to only $418 one in 2008. Financial sponsor-backed IPOs $580 Mean and median values of financial sponsor-backed IPOs (US$ millions) were the most active in the business services, technology, healthcare and 2009 2008 2007 industrial sectors. During 2010, we Mean Median Mean Median Mean $480 Median expect a continuing wave of IPOs Financial sponsors $224.5 $135.5 $166.2 $159.0 $184.1 $111.7 to be brought to market by financial sponsors, with an early focus on the Other $613.2 $200.0 $628.5 $130.0 $264.3 $150.0 portfolio companies that were not acquired in “club deals.” Potential issuers who were acquired by a “club” $XXX of financial sponsors generally are tasked with the challenge of building consensus among the entire club to $1,061 support the valuation and timing of an initial public offering. 8
  11. 11. PricewaterhouseCoopers • 2009 US IPO watch 9 Volume of financial sponsor-backed IPOs vs. other IPOs Financial sponsors Others 2009 44 25 2008 14 43 2007 163 133 0% 20% 40% 60% 80% 100% $418 2009 proceeds from financial sponsor-backed IPOs by Industry $580 (US$ millions) Financial sponsors Others $480 Financial services $1,360 $9,099 Business services $1,353 $2,151 $XXX Technology $1,624 $1,221 $1,061 Healthcare $1,993 $720 Consumer $1,299 $619 Energy/utilities $1,231 $481 Other $111 $950 Industrials $497 $88 Transport $410 0% 20% 40% 60% 80% 100%
  12. 12. Non-US issuers Proceeds increase fourfold “After a 2009 that challenged the resilience of many business models and investment strategies, we are cautiously optimistic that the IPO and secondary markets will continue to be open for depositary receipt issuers during 2010. We anticipate capital will be available for both recapitalization and restructuring of sound businesses and investment in companies with sustainable competitive advantages. Emerging markets should continue to outperform in attracting depositary receipts investors.” Michael Cole-Fontayn, chief executive officer, The Bank of New York Mellon Depositary Receipts In 2009, non-US issuers completed Volume of IPOs by US and non-US companies 18 IPOs in the US IPO market, raising US Non-US $9.2 billion. This represented 26.1% of overall volume compared with 2009 51 18 29.8% in 2008, and 36.7% of the total proceeds in 2009 compared with 6.3% the previous year. 2008 40 17 The most active country of origin for non-US issuers was China, with 15 IPOs that raised $2.0 billion. 2007 240 56 Brazil had one IPO that listed in the US, Banco Santander Brazil, while 0% 20% 40% 60% 80% 100% Canada, the only other country of $418 origin for non-US issuers in 2009, Value of IPOs by US and non-US companies had two companies raising a total (US$ millions) of $0.2 billion in the US. $580 US Non-US The majority of foreign registrants chose the NASDAQ to list their 2009 $15,966 $480 $9,242 shares. Non-US issuers raised $1.7 billion from eleven IPOs listed on this exchange. Although fewer 2008 $27,498 non-US issuers elected to list their $1,855 shares on the NYSE (7 IPOs), their total proceeds were greater, largely 2007 $48,463 $XXX $16,686 the result of the $7.0 billion Banco Santander Brazil IPO. 0% 20% 40% 60% 80% 100% $1,061 $418 10 $580
  13. 13. Stock exchanges US market shares the wealth In 2009, IPOs were split almost evenly Trends in median IPO value by exchange between the NYSE1 and the NASDAQ, (US$ millions) with the NYSE claiming 36 IPOs and NYSE the NASDAQ claiming 33. The NYSE $210 $202 $200 $199 $200 was the leader in proceeds raised with $17.5 billion, representing 69.6% $93 $100 of the total. The NASDAQ, in contrast, NASDAQ $90 $75 $70 listed IPOs that raised $7.7 billion, representing 30.4% of the total. 2005 2006 2007 2008 2009 Listings on the NYSE were dominated Value by exchange by financial services companies, (US$ millions) which comprised 11 of the 36 IPOs. Industrials and consumer were tied NYSE NASDAQ for second on the NYSE with five IPOs each. Technology listings topped the 2009 $17,555 $7,653 list of NASDAQ issuers, with nine IPOs, while the business services sector contributed seven listings. 2008 $26,388 $2,963 Seven of the 2009 top 10 IPOs were NYSE-listed transactions, 2007 $44,685 $20,464 while the remaining three were NASDAQ-listed transactions. 0% 20% 40% 60% 80% 100% Median deal size on the NYSE remained stable at $200 million. Volume by exchange On the NASDAQ, median deal size 154 increased by 42.9% to $100 million 142 from $70 million. 36 33 31 26 2009 2008 2007 1 On October 1, 2008, NYSE Euronext NYSE NASDAQ acquired the American Stock Exchange (AMEX), rebranding it as NYSE Amex Equi- ties. AMEX IPOs have now been reclassified and included as NYSE data for each year in this report. 11
  14. 14. Europe Top 10 IPOs A quote and value slow Volume or synthesis of section if needed In the European stock markets, IPO volume declined The Polish stock exchange, WSE4, was the largest 57.3% and value declined 51.3% (in US$) from 2008 to exchange in terms of volume with 38 IPOs and the third 2009. In local currency, the decline in value was 49.0%. largest in terms of value, raising $2.4 billion (€1.6 billion). The European exchanges raised $10.4 billion (€7.1 billion) The majority of the proceeds raised were attributable from 126 IPOs during 2009 compared with $21.3 billion to the IPO of PGE Polska Grupa Energetyczna, a Polish (€14.0 billion) from 295 IPOs during 2008. utilities company, which was the largest IPO in Europe in 2009, raising $2.1 billion (€1.4 billion). The WSE As far as individual European markets are concerned, represented 30.2% of the region’s IPO volume and 22.8% the NYSE Euronext2 was the largest exchange in terms of the region’s IPO proceeds. of proceeds ($2.8 billion[€1.9 billion]) and delivered the fifth-largest volume (nine IPOs) in 2009. The majority of The slowdown in the European IPO market has been felt the proceeds raised was attributable to Delta Lloyd NV, a across the majority of industries, as the number of IPOs in Dutch life insurance company, which completed an IPO of all sectors declined in 2009 compared with 2008. The top $1.5 billion (€1.0 billion). The NYSE Euronext represented three industry sectors in 2008, namely industrial goods 7.1% of the region’s IPO volume and 27.1% of the region’s and services, investment companies, and technology, IPO proceeds. continued to lead the way in terms of number of IPOs in 2009. The total proceeds raised by initial public offerings on the London markets3 fell by 82.5% to $2.4 billion (€1.7 billion), The European exchanges attracted 39 international IPOs while the number of IPOs tumbled 74.7% to 25 in 2009. in 2009. Those offerings raised $3.1 billion (€2.2 billion), The results made the London markets the second-largest a decrease in both the volume and value compared with exchange in terms of volume and proceeds. The London 2008 which saw 77 IPOs by international companies markets represented 19.8% of the region’s IPO volume raising $9.3 billion (€6.0 billion). In value terms, and 23.0% of the region’s IPO proceeds. international IPO proceeds represented 35.7% of total European IPO proceeds in 2009. By comparison, US stock exchanges saw a total of 18 IPOs by non-US companies raising $9.2 billion (€6.3 billion), representing 36.7% of total IPO value. 2 NYSE Euronext includes the Euronext and Alternext markets and covers Belgium, France, the Netherlands and Portugal. 3 London includes the Official List, AIM, Professional Securities Market and the Specialised Fund Market. 4 WSE includes the Main Market and the New Connect market of the Warsaw Stock Exchange. 12
  15. 15. PricewaterhouseCoopers • 2009 US IPO watch 13 Ten largest European IPOs in 2009 (proceeds in millions) Company € raised $ raised (a) Market Sector PGE Polska Grupa Energetyczna €1,407 $2,098 WSE Utilities Delta Lloyd NV 1,016 1,515 NYSE Euronext Insurance CFAO 806 1,174 NYSE Euronext Industrial goods and services Gartmore Group Ltd 378 551 London Investment company Tata Steel 355 500 London Construction and materials Shin Kong Financial Co. Ltd 266 375 Luxembourg Insurance Tata Motors 253 375 Luxembourg Automobiles and parts Max Property Group Plc 226 309 London Real estate Epistar Corporation 210 306 Luxembourg Technology KGI Securities Co. Ltd 201 287 Luxembourg Financial services Total Top 10 €5,118 $7,490 (a) US dollar amount computed using the monthly average foreign currency exchange rate for the month the IPO was priced. Volume and value by market (proceeds in millions) 2009 2008 # IPOs €m US$ # IPOs €m US$ NYSE Euronext 9 €1,907 $2,813 23 €2,497 $3,840 London 25 1,660 2,387 99 8,884 13,649 (a), (b) WSE 38 1,594 2,363 91 2,502 3,735 (a) Luxembourg (Main Market and Euro MTF) 22 1,575 2,273 19 285 430 (b) Borsa Italiana (Main Market and AIM Italia) 6 137 198 6 129 192 Oslo Bors and Axess 2 91 133 14 65 99 NASDAQ OMX5 11 66 95 26 208 326 Deutsche Börse (Main Market and Entry Standard) 5 53 78 12 330 513 BME6 3 19 27 1 292 460 Athens 1 10 14 - - - SIX Swiss Exchange 4 - - 6 169 261 (c) ISE (Ireland) - - - 1 - - (c) Total European exchanges 126 €7,112 $10,381 295 €13,953 $21,315 EU regulated 41 €4,340 $6,401 115 €11,736 $17,941 Exchange regulated 85 €2,772 $3,980 180 €2,217 $3,374 Note: IPOs by market are shown gross of multiple listings; however, listings on multiple exchanges are netted in the total. (a) 1 triple listing on London, WSE, and Prague, raised €1,390 million ($2,162 million). (b) 1 dual listing on London and Luxembourg raise €18 million ($28 million). (c) 1 dual listing on SIX Swiss Exchange and ISE, not raising any funds. 5 NASDAQ OMX covers both the Main Market and the First North Market and include the Copenhagen, Helsinki, Stockholm, Iceland, Tallinn, Riga and Vilnius exchanges. 6 BME includes the Main Market and the MAB (Alternative) Market of the Spanish exchanges. The BME includes Madrid, Barcelona, Bilbao and Valencia exchanges, MF Mercados Financieros, Iberclear and BME Consulting.
  16. 16. Greater China Top 10 IPOs Moves to quote or one position A number synthesis of section if needed After a decline in 2008, the Greater China IPO markets proceeds, raising $32.0 billion from 73 IPOs, an astounding rebounded in 2009, playing a leading role in the recovery increase of 276.0% over total 2008 proceeds. Hong Kong of the global IPO market. The volume of IPOs in the accounted for more than half of total Greater China Greater China markets increased 32.5% from 157 IPOs in proceeds and took over the leading position from Shanghai, 2008 to 208 IPOs in 2009. The average deal size in Greater which also had an impressive year with $18.3 billion raised China in 2009 was $287.2 million. The proceeds raised from only 9 IPOs. Shanghai has become a favored market from IPOs in 2009 were $59.7 billion, considerably greater for large mainland deals, exhibited by its $2.0 billion than 2008 when the total proceeds were $23.9 billion. average deal size. Shenzhen has proved to be a solid counterpart by courting the smaller deals. Shenzhen led All of the Greater China markets experienced considerable the Greater China market in volume with 90 IPOs raising growth in 2009. Hong Kong recaptured the top spot in $9.2 billion, a 26.8% increase in volume over 2008. Greater China IPOs: volume and value by market (proceeds in millions) 2009 2008 Stock exchange # IPOs Local currency US$ (a) # IPOs Local currency US$ (a) Hong Kong 73 248,227.1 $32,011.5 49 65,976.4 $8,513.7 Shanghai 9 125,124.7 18,327.7 6 73,354.0 10,747.1 Shenzhen 90 62,773.0 9,194.7 71 30,084.0 4,407.6 Taiwan 36 6,630.2 207.3 31 7,667.0 233.6 208 $59,741.2 157 $23,902.0 Note: Greater China IPO values include “greenshoe proceeds” (a) converted at the foreign exchange rate as of December 31 for the year noted. 14
  17. 17. PricewaterhouseCoopers • 2009 US IPO watch 15 Ten largest greater China IPOs in 2009 (proceeds in US$ millions) Company Funds raised (US$m) Market Sector China State Construction Engineering Corporation Ltd. $7,347.2 Shanghai Heavy construction China Minsheng Banking Corp., Ltd. 4,027.3 Hong Kong Banks China Pacific Insurance (Group) Co., Ltd. 3,574.8 Hong Kong Life insurance Metallurgical Corporation of China Ltd. - (A-share) 2,778.6 Shanghai Heavy construction China Longyuan Power Group Corporation Ltd. 2,593.2 Hong Kong Renewable energy equipment Sands China Ltd. 2,503.2 Hong Kong Gaming Metallurgical Corporation of China Ltd. - (H-share) 2,351.1 Hong Kong Heavy construction China Shipbuilding Industry Co Ltd. 2,156.6 Shanghai Commercial vehicles & trucks China CNR Corporation Ltd. 2,036.0 Shanghai Commercial vehicles & trucks Wynn Macau, Ltd. 1,868.6 Hong Kong Gaming Total Top 10 $31,236.6 Note: Companies from Greater China often list different classes of shares on the different Greater China stock exchanges. In such cases, the data above includes the value of shares listed on each exchange and the different exchange listings as separate IPOs.
  18. 18. Top 10 IPOs Latin America Brazil and Chile synthesis of A quote or hold steady section if needed In Latin America, the number of IPOs was roughly the The Brazilian equity market (the Brazilian Stock, Mercan- same in 2009 as in 2008. In 2009, nine IPOs raised a total tile and Futures Exchange) once again led the Latin of $13.3 billion, whereas 8 IPOs raised $5.2 billion in 2008. American IPO market. Of the $13.3 billion raised in The average deal size of $1.5 billion in 2009 was signifi- 2009 in Latin America, nearly $13.2 billion was raised by cantly affected by the Banco Santander Brazil offering, Brazilian companies. Two companies in particular domi- which dual-listed in Brazil and in the United States. Absent nated the IPO landscape, Banco Santander Brazil, raising the Banco Santander Brazil deal, average deal size in $7.6 billion and VisaNet Brasil, which raised $4.3 billion, 2009 would have been $0.7 billion, still 10% greater than both including greenshoe proceeds. Chile was the only the corresponding 2008 amount. other Latin American country to have an IPO in 2009, with three companies raising a total of $110.1 million. Latin America IPOs: volume and value by market (proceeds in millions) 2009 2008 Country Stock exchange # of IPOs Local currency US$ (a) # of IPOs Local currency US$ (a) Argentina Buenos Aires Stock Exchange - - - 1 338.8 $107.5 Brazil The Brazilian Stock, Mercantile and Futures Exchange 6 23,831.5 $13,152.1 4 7,494.9 4,609.3 Chile Santiago Stock Exchange 3 56,965.0 110.1 1 7,350.0 11.7 Mexico Mexican Stock Exchange - - - 2 4,554.9 440.9 Total 9 $13,262.2 8 $5,169.4 Note: Latin America values include “greenshoe proceeds” (a) US dollar amount computed using the monthly average foreign currency exchange rate for the month the IPO was priced. 16
  19. 19. PricewaterhouseCoopers • 2009 US IPO watch 17 Ten largest Latin America IPOs during 2008 and 2009 (proceeds in millions) Company US$ (a) Local currency Year Market Sector Banco Santander (Brasil) S.A. $7,583.1 13,182.5 2009 Brazil Financial services Companhia Brasileira de Meios de Pagamento—VisaNet Brasil 4,289.8 8,397.2 2009 Brazil Financial services OGX Petróleo e Gás Participações S.A. 4,145.8 6,711.7 2008 Brazil Energy CETIP S.A.—Balcão Organizado de Ativos e Derivativos 444.7 773.0 2009 Brazil Financial services Bolsa Mexicana de Valores, S.A.B. de C.V. 387.2 4,000.0 2008 Mexico Financial services Hypermarcas S.A. 362.6 612.4 2008 Brazil Consumer Fleury S.A. 360.1 630.2 2009 Brazil Healthcare Tivit Terceirização de Processos, Serviços e Tecnologia S.A. 315.7 574.6 2009 Brazil Business services Direcional Engenharia S.A. 158.7 274.0 2009 Brazil Real estate Consultatio S.A. 107.5 338.8 2008 Argentina Real estate Total Top 10 $18,155.2 Note: Latin America values include “greenshoe proceeds” (a) US dollar amount computed using the monthly average foreign currency exchange rate for the month the IPO was priced.
  20. 20. Top 10 IPOsthe US, Comparing Europe, Greater China, A quote or synthesis of and Latin America section if needed Greater China pushes global recovery Brazil and Chile hold steady A comparison of IPO activity in the United States, Europe, dramatic decline in IPO activity, capturing only 10% of Greater China, and Latin America reveals that the US global deal value versus 27% in 2008. share of global IPO proceeds declined in 2009 to 23%, in comparison with 37% in 2008. The decrease is largely Europe also lagged in average deal size. The average attributable to Greater China capturing a significantly deal in Europe raised $82.4 million, in sharp contrast larger share of global IPO activity. Also, the Banco to the average deal size of $365.3 million in the US and Santander (dual listing in Brazil and the United States) and $287.2 million in Greater China. The average deal size VisaNet offerings in Brazil contributed to a strong showing in Latin America was heavily influenced by the low from Latin America in 2009. Europe experienced the most volume of deals with high value. Share of IPO proceeds: US, Europe, Greater China, and Latin America (US$ billions) Latin America US Latin America Latin America US $13.3, 12% $25.2, 23% $5.2, 6% $35.4, 11% $65.1, 21% Greater China US $23.9, 30% $29.4, 37% 2009 Europe 2008 2007 $10.4, 10% Greater China $104.0, 33% Greater China Europe Europe $59.7, 55% $21.3, 27% $111.2, 35% Comparison of average IPO proceeds (US$ millions) 2009 2008 2007 IPOs Average IPOs Average IPOs Average proceeds proceeds proceeds US 69 $365.3 57 $514.9 296 $220.1 Europe 126 $82.4 295 $72.3 771 $144.3 Greater China 208 $287.2 157 $152.2 242 $429.8 Latin America 9 $1,473.6 8 $646.2 81 $436.8 18
  21. 21. Developments in capital markets SEC focuses on corporate governance Corporate governance shareholders with the specific experience, qualifications, attributes or skills that were the basis for the Board of In an effort to enhance the disclosures provided to share- Directors’ determination that each director or nominee for holders of public companies regarding compensation and director should serve on the company’s board of directors. corporate governance matters, in December 2009 the The additional disclosure regarding director qualifications Securities and Exchange Commission (SEC) approved will be required for all directors, not just those seeking final rules adopting amendments to the proxy disclosure re-election. rules. The amendments will require companies to make new or revised disclosures about: The link between risk Board leadership structure and role in risk oversight and compensation policies and practices; stock and option awards of executives and directors; director quali- Companies now will have to disclose the reasons for fications and experience; board leadership structure; the their chosen board leadership structure. The SEC says board’s role in risk oversight; and potential conflicts of that in requiring this disclosure, it is not trying to influ- interest of compensation consultants that advise compa- ence a company’s decision about whether to separate nies and their boards of directors. the roles of board chair and CEO; rather, it is seeking a clear picture of how the board operates. Companies must Compensation policies and risks now also disclose how the board oversees risk. This may include disclosing the particular committee within the Companies must include a discussion of compensation board charged with the oversight of the risk process, and policies and practices for all employees, including non- it may involve the disclosure of any reporting relationships executive officers, if those compensation policies and between those managing risk and the board. practices are reasonably likely to have a material adverse effect on the company. The final rules provide a non- Director diversity exclusive list of examples of situations that may potentially trigger the need for such disclosure. The final rules also This rule requires companies to disclose whether, and if provide a non-exclusive list of examples of issues compa- so, how, a nominating committee or the board considers nies may need to address should the company determine diversity in identifying nominees for director. To the that disclosure is required. extent a company has a policy that requires the board or committee to take diversity into account in the nomina- tion process, the company must disclose how the policy Equity award reporting is effectuated and how the effectiveness of the policy Companies must now disclose the aggregate grant date fair is measured. value of stock awards and option awards granted during the fiscal year (regardless of the service period). Under Compensation consultants the old rules, companies were required to disclose the Companies may be required to disclose additional dollar amount recognized for financial statement reporting information regarding the compensation consultants that purposes for the fiscal year. Performance-based equity it engages, depending on the fees paid to the consultant awards will be computed based on the probable outcome (or an affiliate) for non-executive compensation consulting of the performance conditions as of the grant date. services. Disclosure of fees paid to other compensation consultants retained by the company is not required Director qualifications if the board or the compensation committee has To provide investors with more meaningful information retained its own consultant that reports directly to to support the voting decision, companies must provide the compensation committee. 20
  22. 22. PricewaterhouseCoopers • 2009 US IPO watch 21 IFRS Stock exchange market share Although the Securities and Exchange Commission (SEC) As trading in the United States has increasingly become in November 2008 issued a proposed roadmap that electronic, established stock exchanges have seen targeted mandatory adoption of IFRS in the United States competition intensify. Electronic exchanges like Direct beginning in 2014, there is a degree of uncertainty around Edge and Bats have proved to be formidable competitors the final timetable. This uncertainty can largely be attrib- to the NYSE and Nasdaq. Together, these two exchanges uted to more immediate issues related to the financial have captured over 20% of trading volume in the US. crisis that the SEC needs to address. Nevertheless, the SEC continues to articulate that moving to a single set of While the trading landscape is certainly more competitive robust, transparent, global accounting standards is in the now than it has ever been, for the time being, there best interest of investors globally, and it is expected that seems to be room for both the established players and the SEC will ultimately propose a revised roadmap. the upstarts. Absent an agreed-upon roadmap for transition, US companies will still see an impact from IFRS. The US Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have in place a Memorandum of Understanding that seeks to improve both US GAAP and IFRS in 11 major topical areas. As a result, many US accounting standard-setting projects will be influenced by the IASB. We expect continued convergence between US GAAP and IFRS in the near term, despite the absence of an established date for US IFRS adoption. Today, on the stock exchanges in the United States, domestic companies must follow US GAAP while non-US companies may use IFRS or US GAAP.
  23. 23. About PwC’s Transaction Services The PricewaterhouseCoopers Transaction Services prac- IPO Watch is a series of global PwC-issued reports tice provides due diligence for M&A transactions, along released quarterly and annually that track and analyze with advice on M&A strategy and integration, divesti- IPO activity in the United States, Europe and Greater tures and separation, valuations, accounting, financial China. All editions of IPO Watch and additional reporting, and capital raising. With approximately 1,000 publications about the IPO process, including The IPO deal professionals in 16 cities in the United States, and a Roadmap and Guide to Going Public, are available at global network of more than 6,000 deal professionals in 90 countries, PwC deploys experienced teams that have deep industry and local market knowledge, and technical Acknowledgments experience tailored to each client’s situation. The Trans- action Services team can be involved from strategy to We would like to thank the following organizations and integration and employ an integrated business approach individuals for their contributions to this report: The Bank to uncover the realities of a deal. The field-proven, globally of New York Mellon, NASDAQ OMX, NYSE Euronext, consistent, controlled deal process helps clients minimize John Verlander, Manoj Mahtani, Lisa Monvignier, their risks, progress with the right deals, and capture value Sachin Latawa, and Santhosh Daniel. both at the deal table and after the deal closes. For more information, visit 22
  24. 24. To have a deeper conversation about how this subject might affect your business, please contact: North America Latin America† Henri Leveque Ivan Clark [1] 678 419 3100 [55] 11 3674 3926 Scott J. Gehsmann Tino Montero [1] 646 471 8310 [1] 305 375 7301 Mike Dillon Armando Martinez [1] 415 498 8234 [52] 555 263 5749 George Starr † Includes Mexico, Central America, [1] 973 236 4100 and South America. Neil Dhar Europe [1] 312 298 2711 Tom Troubridge [44] 20 7804 2723 Howard Friedman [1] 646 471 5853 Richard Weaver [44] 20 7804 3791 Canada Geoff Leverton Asia [1] 416 815 5053 Kennedy Liu [852] 2289 1881 Richard Nurmi [852] 2289 2922 © 2010 PricewaterhouseCoopers LLP. All rights reserved. “PricewaterhouseCoopers” refers to PricewaterhouseCoopers LLP (a Delaware limited liability partnership) or, as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate and independent legal entity. NY-10-0503