Global IPO Trends 2012 PDF

Global IPO trends 2012
Prepare early, move fast
Perspectives on global IPO markets
Foreword
Dear friends,
The global IPO markets showed remarkable resilience in 2011. With economic recovery gaining momentum and a solid pipeline of profitable companies ready to list, the first half of the year was strong. Unfortunately, Europes debt problems resurfaced at the halfway point and other nations exhibited slower economic indicators, making conditions difficult for the rest of the year. However, even with many of the worlds strongest IPO markets effectively closed for the last six months of 2011, the fundraising levels they managed to achieve were impressive. In 2011, we saw IPO companies and their potential investors adapting to a new market environment, one in which volatility has become the norm. Timing this market is an art; the windows when conditions are favorable for an IPO are short and unpredictable. Companies need to prepare earlier, and be ready to move fast. Shortterm concerns aside, 2011 saw the continuation of many of the trends that have driven global IPO markets for a few years now the rapid growth of emerging markets and the rise of China, in particular. These trends have continued into 2012. Developed markets peaked intermittently during the year, in key industries such as technology, mining and metals and healthcare, and there was a growing number of private equity and venture capital-backed IPOs. Volatility will remain with us, too, although probably at a reduced level. Europe may not resolve its sovereign debt problems, but it should at least agree upon a way forward that in itself would remove a significant weight from the IPO markets. This ninth annual Ernst & Young Global IPO trends report highlights the outlook for IPO markets and analyzes the key trends of 2011. It includes the perspectives of some of the worlds top investment bankers, whom wed like to thank for their time and support. Life in the public eye would not suit all businesses, but for many fastgrowing private companies, an IPO can raise the capital needed to accelerate growth and achieve market leadership. We look forward to working with these companies and their teams in their transformation from private entities to public enterprises. Maria Pinelli Global Vice Chair Strategic Growth Markets
ii Global IPO trends report 2010
Contents
Global IPO markets

2 6
Global outlook: eight trends to watch in 2012 In review: 2011 Interview 9 David Erickson, Barclays Capital
Asia
10 14 China
Greater scrutiny Interviews 12 Fang Fang, JPMorgan Chase & Co. 13 Daniel Ng, BOC International
India
Fresh capital to fuel growing consumerism
Americas
16 19 United States
A waiting game Interview 18 Tom Fox, UBS
Brazil
Private equity leads the way
EMEA
20 24 Europe
A bumpy road ahead Interviews 22 Georg Hansel, Deutsche Bank 23 Klaus H. Hessberger, JPMorgan
Middle East and Africa

Saudi Arabia leads the way
Private equity
25
A tale of two markets
Global
Global IPO markets

Global outlook
Eight trends to watch in 2012

1. Learning to live with volatility. The biggest single factor affecting the global IPO markets last year was probably volatility. The CBOE Volatility (VIX) index, a popular measure of implied volatility of S&P 500 index options, has become one of the closestwatched market indicators. When the VIX is above the 20% to 25% range, volatility is such that the IPO markets are effectively shut. The VIX was on a downward trend in the first half of 2011, but it shot up in the middle of the year when the European debt crisis unfolded and the US saw its credit rating downgraded. Volatility will most likely diminish somewhat in 2012, but the unpredictable nature of the market will be a key factor influencing IPO decisions for the next 12 months at least. The windows for completing a deal successfully are likely to open and close quickly, and often with little or no warning. 2. Managing execution risk. Questions about valuation and aftermarket performance remain front of mind for IPO candidates, but execution risk has become a primary concern. With pricing conditions changing so quickly and a record number of companies having to withdraw their listing plans, candidates are worried about whether they will be able to complete their public offering. On the upside, investors have grown tolerant of companies that announce plans for an IPO and then delay a listing until the timing is right. But they will still penalize those that decide to bring a deal to the market, only to scrap their plans because they lack support. The elevation of execution risk changes the way companies need to plan for their IPO. 3. Prepare early, move fast. Two key factors will increase an IPO candidates chances of completing a listing and on favorable terms this year: begin listing preparations earlier than normal, and be ready to move a lot more quickly once a viable market window opens. Globally, some IPO markets are better suited to an accelerated listing process than others. But wherever they plan to list, IPO companies need to ensure they have a clear, compelling story to tell investors, with the transparent financial information needed to back it up. Likewise, candidates will need to be confident that they have identified and managed any risks that might slow down the listing process or derail it entirely. 4. Companies to keep an open mind. The difficulty of taking a company public encouraged many IPO companies to think more creatively about where they might list last year. We expect this trend to continue in 2012. Rather than simply listing on their national market by default, we saw several European companies take some or all of their IPO to Asia or the US. Newer forms of equity financing, such crowdfunding portals enabling direct access to investors and newcomers like important multilateral trading facilities entering the listing business, also became more appealing to IPO companies. With the market conditions likely to remain challenging through 2012, companies need to take a broad view of their funding options. 5. Central bankers hold the keys. The sovereign debt crisis in Europe and other nations exhibiting slower economic indicators weighed heavily on global IPO markets last year. The failure of policymakers to agree upon a clear solution to the Eurozones fiscal difficulties was the main reason why IPO activity virtually ground to a halt in the second half of the year. As 2012 moves forward, the outlook is brighter. Europe has made progress toward fixing its problems and the US economy has improved. Globally, there is a very full pipeline of profitable, capitalhungry businesses eager to go public. Nonetheless, the keys to a sustained IPO market recovery will, largely, remain in the hands of the worlds central bankers and sovereign leaders through 2012.
The windows for completing a deal successfully are likely to open and close quickly, and often with little or no warning.
Global
In an uncertain market, companies should keep an open mind about their IPO options. A longterm view is essential. Taking a company public is not an event its a journey. And its one of the most rigorous, transformational and scalable journeys a company and its executives will experience.
Maria Pinelli, Global Vice Chair, Strategic Growth Markets, Ernst & Young
Figure 1: Global IPOs by number of deals and capital raised

608 574 442 395 355 297 293 314 302 296 164 78
Q4 06 $112 Q4 07 $105 Q1 04 $29 Q2 04 $33 Q3 04 $29 Q4 04 $39 Q1 05 $29 Q2 05 $39 Q3 05 $38 Q4 05 $74 Q1 06 $39 Q2 06 $66 Q3 06 $49 Q1 07 $37 Q2 07 $95 Q3 07 $59 Q1 08 $41 Q2 08 $39 Q3 08 $13 Q4 08 $2
603
457 385 339 339 327 409 364
452 360
473
484 383 291
253
274
255
146 52
Q1 09 $1
82
Q4 10 $132 Q2 09 $10 Q3 09 $34 Q4 09 $67 Q1 10 $54 Q2 10 $47 Q3 10 $53 Q1 11 $47 Q2 11 $66 Q3 11 $29 Q4 11 $29
Capital raised (US$b)
Number of deals
Figure 2: Key global IPO statistics

2009 Number of deals Capital raised (US$) Average deal size (US$) PEbacked IPOs Top five sectors (number of deals) 577 $112.6b $195.1m 53 deals, $16.2b Industrials (101) Materials (96) High technology (59) Consumer staples (49) Financials (46) Industrials ($23.2b) Financials ($22.6b) Energy ($12.1b) Real estate ($10.8b) Materials ($7.2b) Hong Kong (56) KOSDAQ (56) Shenzhen SME (54) Australian (37) Shenzhen ChiNext (36) Hong Kong ($21.9b) Shanghai ($20.4b) New York ($19.1b) NASDAQ ($8.1b) Shenzhen SME ($6.2b) 2010 1,393 (141%1) $284.6b (153%1) $204.8m 155 deals, $35.0b Materials (307) Industrials (236) High technology (180) Consumer staples (113) Energy (94) Financials ($80.0b) Industrials ($57.6b) Materials ($38.5b) Energy ($23.2b) High technology ($20.7b) Shenzhen SME (205) Shenzhen ChiNext (116) Australian (92) Hong Kong (87) New York (82) Hong Kong ($57.4b) New York ($34.7b) Shenzhen SME ($30.2b) Shanghai ($27.9b) Tokyo ($14.3b) 2011 1,225 (12%2) $169.9b (40%2) $138.7m 118 deals, $38.3b Materials (268) Industrials (199) High technology (149) Consumer products3 (124) Energy (110) Materials ($29.2b) Industrials ($26.4b) Energy ($21.3b) Financials ($15.9b) High technology ($14.7b) Shenzhen ChiNext (128) Warsaw NewConnect (123) Shenzhen SME (115) Australian (101) Hong Kong (68) New York ($30.5b) Hong Kong ($25.3b) Shenzhen SME ($15.7b) Shanghai ($15.1b) London ($13.9b)
Top five sectors (capital raised)
Top five exchanges (number of deals)
Top five exchanges (capital raised)
1 2 3
Percentage change from 2009 to 2010. Percentage change from 2010 to 2011. Consumer products includes consumer services such as professional services.
Please see Appendix for the list of stock exchanges. Source for all charts and tables shown: Dealogic, Thomson Financial, Ernst & Young.
Global
Global IPO markets

Global outlook
Eight trends to watch in 2012

6. Remember, companies are profitable. While 2011 was a difficult year for the global economy, its worth noting that companies overall are profitable. Earnings growth for the S&P 500 was around 9% for the fourth quarter of last year. That continued a downward shortterm trend, although some sectors performed far better than the average, with industrials and technology companies both above 16%. Across the S&P 500, earnings growth rates are forecast to be rising again in the second half of 2012. Earnings growth among Asian companies is also strong and accelerating. A vibrant IPO market needs at least two ingredients: profitable, capitalhungry companies and a positive equity market sentiment. Strong corporate earnings growth helps to deliver both. 7. Learning from Facebook. The big IPO story of 2012 is likely to be a recordbreaking listing of Facebook, the social network. A successful public offering could give the IPO markets a big confidence boost, if subsequent trading in Facebook stock performs well. One deal does not make a trend, but IPO companies in other sectors can learn a lot from studying the recent newlisting experiences of social media and internet companies. To keep the offer price high and to minimize execution risk, companies may offer relatively small slices of their total capital. More companies may explore this strategy in 2012. 8. Private equity will show its strength. The proportion of successful IPOs involving private equity firms increased to record levels last year. Globally, firms exited 118 companies, raising around US$38.3b, representing 23% of total IPO proceeds. In the US, nine of the years ten biggest IPOs involved private equitybacked companies. Partly, the high proportion of private equity deals in the market is due to the fact that many companies that didnt have private equity involvement decided to cancel or delay their listing plans. It also shows how private equity firms have become more nimble; when market windows opened, they were ready to move quickly. With an estimated US$375b in dry powder in May 20121 and their investment portfolio aging rapidly, we expect private equity firms to be significant IPO players again in 2012. There was also a rise in venture capital (VC) backed IPOs globally in 2011, this is expected to continue in 2012. VC firms exited 141 companies in 2011, raising around US$17.3b via IPO, representing 10% of total IPO proceeds. In May 2012, venture capital firms hold an estimated US$115b in dry powder.
Figure 3: Global IPOs by number of deals and capital raised, by year
1,837
1,748 1,042
1,883 1,520 1,552
1,796
2,014
1,393 769 1,225 577

$113 $285 $170
IPO companies should begin their listing preparations earlier than normal and be ready to move fast once a viable market window opens.
1,372
876 847 812

$210 $131 $180 $267 $295
$132
$145
$116
$177
$99
$70
$58
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Capital raised (US$b) Number of deals
1 Source: Preqin, May 2012
$96
Global
Figure 4: 2010 and 2011 global IPOs by region Number of deals

63 60 21 24 14 14 2 2
Capital raised, US$b

67 $191 52 15 20 15 23 3 5
879 734
292 292 192 172 30 27

Asia-Paci c 2010 EMEA 2011 North America Central and South America
$88 $41 $35
$44
$38 $9 $9
Asia-Paci c 2010
EMEA 2011
North America
Central and South America
% of global IPO activity
% of global IPO activity
Figure 5: 2011 global IPOs by domicile country Top 10 by number of deals

Country
Greater China* Poland United States Australia South Korea Canada India Japan United Kingdom Indonesia Rest of world** (52 countries) Grand total
Top 10 by capital raised

% of global total
31.70% 11.20% 8.80% 8.00% 5.60% 5.20% 3.30% 3.00% 2.30% 2.10% 18.80% 100.00%
No. of deals
388 137 108 98 69 64 40 37 28 26 230 1,225
Country
Greater China* United States Switzerland Spain Russian Federation Brazil South Korea Italy Poland Canada Rest of world** (52 countries)
Capital raised (US$m)

$72,337 $35,977 $10,046 $5,300 $4,694 $4,412 $3,562 $3,024 $2,723 $2,447 $25,329 $169,851
% of global total
42.60% 21.20% 5.90% 3.10% 2.80% 2.60% 2.10% 1.80% 1.60% 1.40% 14.90% 100.00%
Grand total Based on the listed company domicile. *Greater China includes Mainland China, Hong Kong and Taiwan. **Rest of world includes countries with 1% or less of IPO activity by number of deals or capital raised.
Figure 6: 2011 global IPOs by stock exchange* Top 10 by number of deals

Exchange Shenzhen** Warsaw NewConnect Australian Hong Kong New York NASDAQ KOSDAQ Toronto Venture Bombay Shanghai All other exchanges No. of deals 243 123 100 68 67 54 53 47 39 37 394 % of global total 19.80% 10.00% 8.20% 5.60% 5.50% 4.40% 4.30% 3.80% 3.20% 3.00% 32.20%
Top 10 by capital raised

Exchange New York Shenzhen** Hong Kong*** Shanghai London NASDAQ Singapore Madrid Sao Paulo Warsaw All other exchanges Capital raised (US$m) $30,502 $27,809 $25,296 $15,075 $13,915 $9,614 $7,257 $5,300 $4,412 $2,775 $27,895 % of global total 18.00% 16.40% 14.90% 8.90% 8.20% 5.70% 4.30% 3.10% 2.60% 1.60% 16.40%
*Data based on domicile of the exchange, regardless of the listed company domicile. **Shenzhen Stock Exchange includes listings on the Mainboard, the Small and Medium Enterprise (SME) market and ChiNext. ***Excludes Swiss commodities trader Glencore Internationals US$10b IPO, which is duallisted on the London and Hong Kong stock exchanges in May 2011. Capital raised for this deal was attributed to London Stock Exchange, the primary stock exchange. If this deal is included, HKEx raised US$35.3b in 69 deals. Source for all charts and tables shown: Dealogic, Thomson Financial, Ernst & Young.
Global
Global IPO markets

Global outlook
In review: 2011
A year of two halves. The global IPO markets got off to a promising start in 2011, with two solid quarters, continuing the pace of 2010. However activity dropped dramatically midway through the year, principally due to investor concerns about sovereign debt issues in Europe and Standard & Poors downgrade of the USs credit rating. Capital raised globally in the year declined by 40% to US$169.9b, compared to 2010. Around 66% of the global capital raised in the year was secured in its first six months. The number of deals was down by 12% in 2011 at 1,225 IPOs compared to 2010. The headline figures might be gloomy, but fundraising activity in 2011 still exceeded 2009 activity of US$113b by around US$57b. Asia ascendant. Asian exchanges (including India) led the world in bringing new companies to market in 2010, and this trend continued last year. We also saw a higher proportion of private enterprises wanting to go public. Nevertheless, the Asian markets could not avoid the uncertainty and volatility that hurt IPO markets elsewhere. Its exchanges completed 610 deals in 2011 raising US$87.5b, a 50% drop by capital raised compared to 2010. The Shanghai and Shenzhen Stock Exchanges (SME and ChiNext) led the way, raising US$42.9b in 280 deals together. The Hong Kong Stock Exchange (HKEx) raised US$25.3b1 in 68 deals. Asia will remain a key driver of IPO resurgence in 2012 as the global economy continues to improve. US shows its resilience. IPO activity on US exchanges held up relatively well in 2011, given the very difficult circumstances. As with markets elsewhere, a strong performance in the first half of the year was followed by a disappointing outcome in the second. Overall, capital raised in 2011 fell by a modest 8% compared to 2010, to US$40.2b. With the markets volatile and valuations uncertain, the number of IPOs fell from 2010 by 24% to 124 deals in 2011, but we expect to see this number increase significantly in 2012. There is a strong pipeline of around 200 companies ready to list, once conditions stabilize. Hot sectors include technology, real estate, oil and gas, pharma and consumer retail. Private equity will continue to play an important role in the IPO market and we also expect to see a solid level of IPO carve-outs and spin-offs in 2012. Europe looks for a way forward. Economic troubles in Europe blighted the worlds IPO markets last year, although surprisingly its stock exchanges accounted for a slightly larger share of global IPO funds raised increasing to 17% from 13% in 2010. However, IPO capital raised fell 19% compared to 2010, to US$29.7b and performance varied across the continent. The IPO market in Poland was very active, with 22 listings on the Warsaw Stock Exchanges increasingly mature main market and a record 123 on NewConnect, its market for younger businesses. In France, by contrast, 2011 saw the lowest total capital market financing not only IPOs since 1995. Activity was also slow in the UK, which is normally the regions IPO powerhouse. We entered 2012 without a solution to Europes debt problems, but there was a greater likelihood that policymakers would find a positive way forward.
Asia has been a key driver of the IPO resurgence as the global economy emerged from recession. In 2010, Asian exchanges led the world in bringing new companies to market, and this trend continued in 2011.
1 Excludes Swiss commodities trader Glencore Internationals US$10b IPO, which is duallisted on the London and Hong Kong stock exchanges in May 2011. Capital raised for this deal was attributed to London Stock Exchange, the primary stock exchange. If this deal is included, HKEx raised US$35.3b in 69 deals.
Global
Figure 7: 2011 global IPOs by sector

22 17
16 16 12 9 10 6 9 13 7 5 9 6 7 5 4 8 4 3 5 3 Media and entertainment 2 Telecommunications 2
Consumer products and services
High technology
Consumer staples
Health care
% of global number of deals
% of global capital raised
Figure 8: 2011 top 20 global IPOs by capital raised

Issue month May Mar Jul Mar Feb Jun Oct May Issuer name Glencore International plc. Hutchison Port Holdings Trust Bankia HCA Holdings Inc. Kinder Morgan Inc. Prada SpA Sinohydro Group Ltd. Shanghai Pharmaceuticals Holding Co. Ltd. Chow Tai Fook Jewellery Co. Ltd. JSW SA New China Life Insurance Co. Ltd. Nielsen Holdings NV CITIC Securities MGM China Holdings Ltd. Hui Xian REIT Arcos Dorados Holdings Inc. Yandex NV Sinovel Wind Group Co. Ltd. Samsonite International SA Sun Art Retail Group Ltd. Issuer domicile Switzerland Hong Kong Spain US US Italy Mainland China Mainland China Hong Kong Poland Mainland China United States Mainland China Macao Mainland China Argentina Russian Federation Mainland China United States Mainland China Sector Materials Industrials Financials Health care Energy Retail Energy Health care Issuer business description Diversified natural resources group Involved in port and harbor operations and warehousing services Commercial bank Operates hospitals and surgery centers Transportation and storage of natural gas, refined petroleum and crude petroleum Luxury fashion designer Engaged in water and hydropower generation Manufacturer of pharmaceuticals Capital raised (US$b) 10 5.5 4.4 4.4 3.3 2.5 2.1 2.1 Exchange(s) London, Hong Kong Singapore Madrid New York New York Hong Kong Shanghai Hong Kong
Dec Jul Dec Jan
Consumer products Materials Financials Consumer products Financials Media and entertainment Real estate Retail Technology Industrials
Manufacturer and retailer of diamond and gold jewelry Coal producer and distributor Life insurance broker An information and measurement company that provides data on consumers' preferences and behavior Provider of investment trust management and securities brokerage services Leading casino gaming resort developers, owners and operators Real estate investment trust Operator of fastfood restaurants; McDonalds franchisee Russian internet and search company Engaged in developing, designing, manufacturing and marketing largescale onshore/offshore series wind turbines Engaged in the design, marketing and sale of travel, business and causal luggage Hypermarket operator
Real estate
Industrials
Financials
Materials
Energy
Retail
2 1.9 1.9 1.9
Hong Kong Warsaw Hong Kong, Shanghai New York
Oct Jun Apr Apr May Jan
1.8 1.6 1.6 1.4 1.4 1.4
Hong Kong Hong Kong Hong Kong New York NASDAQ Shanghai
Jun Jul
Retail Retail
1.3 1.2
Hong Kong Hong Kong
Source for all charts and tables shown: Dealogic, Thomson Financial, Ernst & Young.
Global
Global IPO markets

Global outlook
Figure 9: Global IPOs by number of deals and capital raised, by month

178 143
163
142
121
128
110
108
107
101
97
109
132
136
91
92
87
85
82
87
96
99
64
60
44
66 Nov'11 $9 Dec'11 $14 Jan'12 $2

Oct-11 Jan-12 Jul-11
May'10 $13
Aug'10 $11
Nov'10 $52
May'11 $28
Aug'11 $7
Number of deals
Source: Dealogic, Ernst & Young.
Figure 10: CBOE Volatility Index (VIX)

90 80 70 60 50 40 30 20 10 Jan-07 Jan-08 Jan-09 Jan-10 Apr-07 Apr-08 Apr-09 Apr-10 Jan-11 Oct-07 Oct-08 Oct-09 Oct-10 Apr-11 Jul-07 Jul-08 Jul-09 Jul-10 0
Date up to end of 31 March 2012. Source: Capital IQ.
The VIX index tracks volatility of S&P 500 index options. Often described as the fear index, it's a useful marker of investor sentiment. When the VIX is above the 20%25% range, it becomes much harder to complete a successful IPO. During 2007 the VIX bumped along below the 20% level. But it started to climb through 2008, and spiked up to 30%, as the credit crunch began deteriorating into a deeper financial crisis. In the nearpanic climate of late 2008, the index rocketed upward, at one point hitting almost 80%. It has trended downward since then, but macroeconomic shocks in 2010 and again in 2011 have spooked investors, and sent the VIX heading back up. At the end of 2011, the index reflected an improving environment for IPO candidates.
Mar'12 $10
Jan'10 $12
Feb'10 $12
Mar'10 $30
Apr'10 $20
Jun'10 $13
Jul'10 $32
Oct'10 $52
Dec'10 $27
Jan'11 $13
Feb'11 $12
Mar'11 $21
Apr'11 $19
Jun'11 $19
Sep'10 $9
Jul'11 $17
Sep'11 $4
Oct'11 $6
Feb'12 $5
76
Global
Interview: David Erickson

CoHead of Global Equity Capital Markets at Barclays Capital
Positive outlook
We cant have a resurgence in the IPO markets without better performance in the equity markets. How do you think the major indices will do this year?
With companies showing solid earnings growth and investors more upbeat, global IPO markets should be stronger this year, says David Erickson of Barclays Capital.
sectors, as market conditions continue to improve, we expect more of them to look to access the public markets for financing. What will it take for the global IPO markets to get back to normal? Its hard to say what normal is anymore. Since 2008, market volatility has continued to be higher and market windows for IPOs are smaller than ever; I think that could be the new normal. To see larger windows and longterm lower volatility we need to move some of the macro issues like the European crisis into the solved category, or at least see them moving towards resolution in a more significant way. Individual companies are generally performing well, even those based in Europe that have a significant amount of their business outside of Europe. As I said, US companies have had significant growth and Asian companies are continuing to grow in a significant way. What do you think are the main questions that investors will be asking IPO candidates this year? Investors are often asking about exposure, as most investors are still nervous about the European sovereign crisis; investors remain very focused on implications for growth in Europe for the short to intermediate term. As a result for those companies that have significant business exposure to Europe, questions will likely focus on those trends what they have seen; what they expect to see nearterm and how are they forecasting for the mediumterm (assumptions, etc.). For the IPO market overall, however, I think we are starting to see a more positive outlook. Prior to the financial crisis in 2008, investors used to ask questions like, How much cash do you need to weather the storm? and How long is that going to last you? Conditions are more favorable now, so theyre more likely to ask about growth and business margin trends all the typical things theyd ask about when were in a better market. What trends do you see in the global IPO market over the next five years? Were seeing companies taking a more global view of the markets at the moment, such as European luxury goods brands taking their IPOs to Hong Kong. Still, over the longer term, I think well see markets become increasingly local. What I mean by that is more companies will want to list in their local markets as the liquidity of those markets increases and the pool of available capital grows. I think some of the Asian markets like Hong Kong, Shanghai and Singapore could become bigger IPO listing venues than New York or London. Thats not necessarily because companies in Europe and the US are leaving or listing elsewhere. It is largely based on the thesis that currently there are fewer Asian companies in public hands, so there is more scope for growth in new listings in the next several years. Were going to see more new market value put into public hands over the next several years in Asia than we are potentially going to see in either the US or Europe. Thats probably the biggest trend that well see five or ten years down the road.
Well see two major drivers for the global equity markets in 2012. The first will be whatever happens in Europe and how the sovereign debt crisis is resolved. The second will be political change. We have major elections coming in 59 countries many of them major markets. We might also see forced political change in some places, like we had in the Middle East last year. Those are the kind of macro issues that will continue to drive the heightened volatility weve seen over the last couple of years. I think well see relative outperformance in Asia. We currently have historically low equity valuations and accelerated earnings growth in markets like Taiwan, Philippines, South Korea, Malaysia and Singapore. We expect AsiaPacific earnings growth to go from 9% yearoveryear in 2011 to something like 11% to 13% in 2012 and possibly 13% to 15% in 2013. The US markets are also relatively cheap and earnings growth has been significant. When the figures are finalized, we expect earnings growth of something like 14% to 15% for 2011. That may slow down a bit this year, but companies are still growing profitability through what we expect to be improving economic growth. Why do you expect more venture capitalbacked companies to seek an IPO this year? We saw a lot of largecap private equitybacked companies doing IPOs last year; in 2012 we expect to see the rise of smaller, venture capitalbacked businesses. In volatile conditions, highbeta, high multiple stocks tend to underperform, but tend to outperform in improving economic and growth conditions. With many of these venture capitalbacked companies in higher beta
We saw a lot of private equity backed companies completing IPOs last year; in 2012 well see the rise of smaller, venture capitalbacked businesses.
Asia
China
Greater scrutiny
Companies planning an IPO will face tougher questions from investors and lower valuations
A tough year, but an upbeat ending. Greater Chinas IPO markets were looking solid at the start of 2011, but the optimism didnt last. Activity fell dramatically at the years midpoint as worries about Europes sovereign debt problems and slower growth in the US and other nations hit investor confidence. Funds raised in 2011 fell 47% compared to the year before, reaching just US$68.4b. Activity improved at the end of the year and funds raised in 2011 still exceeded the 2009 total by 33% and listings from private enterprises primarily dominated the IPO market. China remains the global IPO powerhouse. The Hong Kong, Shenzhen and Shanghai stock exchanges were once again among the top five global markets, ranked by capital raised. Despite a very tough year, IPO activity on Greater China exchanges accounted for 40% of global IPO funds raised in 2011. A big wave of IPOs came to Hong Kong in December, making it one of the worlds leading global IPO markets by IPO funds raised last year, alongside the New York Stock Exchange. It is interesting to note that in addition to state owned enterprises, entrepreneurial high growth companies are accessing the Chinese capital markets as a source of growth capital. The days of high multiple valuations are over, for now. Many Chinese companies shelved their IPO plans in 2011 when valuation multiples declined. These companies will likely come back to the markets in 2012, once valuations begin to better reflect their underlying business prospects. But with a heavy flow of IPO deals to choose from, investors will be more careful about which ones they support and at what price. Investors are becoming more selective. In 2012, investors are likely to ask tougher questions about the quality of corporate governance and senior management at companies seeking funds. This is good news for the longterm evolution of the markets, but it could make life tougher for companies in the short term. Those that dont understand how high investors have raised the bar in terms of management quality may find it harder to raise the funds they need. Hong Kong is drawing Western companies. Expect to see more foreign companies using the Hong Kong market to reach Asian investors in 2012. Greater Chinas biggest deal of the year saw Switzerlandbased commodity trader Glencore International bring a US$10b listing to Hong Kong1. Italian fashion house Prada SpA boosted its profile among Asias luxury brand buyers with a US$2.5b deal, also in Hong Kong. With continuing economic uncertainty in Europe, Hong Kong will be an increasingly attractive destination for Western companies in 2012.
Glencore International was duallisted on the Hong Kong and London stock exchanges.
10
Asia
Figure 11: Greater China IPOs by year

440 361
189 146 84 $15 $25 123 97
159
Companies that dont understand how high investors have raised the bar in terms of management quality may find it harder to raise the funds they need.
Terence Ho, Greater China IPO Leader, Ernst & Young
$130
2004
2005
2006
2007
2008
2009
2010
2011
Number of deals
Figure 12: Key Greater China IPO statistics

2009 Number of deals Capital raised (US$) Average deal size (US$) Top five sectors (number of deals) 159 $51.5b $324.1m Industrials (34) Materials (22) Consumer staples (19) High technology (18) Consumer products (15) Industrials ($19.7b) Materials ($5.4b) Real estate ($5.2b) Media and entertainment ($4.8b) Energy ($3.5b) 56 deals, $21.9b 8 deals, $20.4b 54 deals, $6.2b 36 deals, $3.0b 2010 440 (1 77% )
1 3
$68
$54
$57
$18
$52
2011 361 (18%2) $68.4b3 (47%2) $189.3m Industrials (84) Materials (72) High technology (40) Consumer staples (36) Consumer products (28) Materials ($11.9b) Industrials ($11.7b) Energy ($6.8b) Retail ($6.6b) Financials ($6.2b) 68 deals, $25.3b 37 deals, $15.1b 115 deals, $15.7b 128 deals, $12.1b
$129.8b (152%1) $295.1m Industrials (103) Materials (97) High technology (70) Consumer staples (44) Health care (28) Financials ($51.1b) Industrials ($20.1b) Materials ($18.5b) High technology ($10.6b) Health care ($6.1b) 87 deals, $57.4b 26 deals, $27.9b 205 deals, $30.2b 116 deals, $14.1b
Stock exchanges: Hong Kong Shanghai Shenzhen SME Shenzhen ChiNext (number of deals, capital raised)
1 2
Percentage change from 2009 to 2010. Percentage change from 2010 to 2011. 3 Excludes Swiss commodities trader Glencore Internationals US$10b IPO, which is duallisted on the London Stock Exchange and Hong Kong Stock Exchange in May. Capital raised for this deal was attributed to London Stock Exchange, the primary stock exchange. If this deal is included, HKEx raised US$35.3b in 69 deals.
Figure 13: 2011 top five Greater China IPOs by capital raised
Issue month Jun Oct May Issuer name Prada SpA Sinohydro Group Ltd. Shanghai Pharmaceuticals Holding Co. Ltd. Chow Tai Fook Jewellery Co. Ltd. New China Life Insurance Co. Ltd. Issuer domicile Italy Mainland China Mainland China Hong Kong Mainland China Sector Retail Energy Health care Issuer business description Luxury fashion designer Engaged in water and hydropower generation Manufacturer of pharmaceuticals Capital raised (US$b) 2.5 2.1 2.1 Exchange(s) Hong Kong Shanghai Hong Kong
Dec Dec
Consumer products Financials
Manufacturer and retailer of diamond and gold jewelry Life insurance broker
2 1.9
Hong Kong Hong Kong, Shanghai
Based on IPO activity on Greater China exchanges (Hong Kong, Shanghai, Shenzhen SME and Shenzhen ChiNext). Source for all charts and tables shown: Dealogic, Thomson Financial, Ernst & Young.
11
Asia
Interview: Fang Fang

Head of China Investment Banking at JPMorgan Chase & Co.
Management quality?
Last year we saw fewer IPO deals and lower valuations. Has that changed the way Chinese executives think about IPOs and the role a deal might play in their wider plans for business growth? The fact that so many companies have rescheduled IPOs that were planned for last year has certainly had an impact on our clients business plans. They have had less capital at their disposal and the IPO exercise, which takes up a lot of management time anyway, has been extended. A delayed IPO can also harm the morale of your employees and senior management. The impact however, is not entirely negative. A delay can give management more time to develop the business, making it more attractive to investors. Weve also seen cases where a company that was too young to go public has been pushed into an IPO by its banks, only for management to struggle with the governance demands that come with a public listing. The Chinese markets came under fire last year for the poor governance standards and financial reporting practices of some companies. Is tougher regulation needed? The current listing regulations have worked well. We may need to finetune some of them, but the necessary rules on listings, disclosure and privatization are in place. You are bound to see some companies that are maliciously fabricating their financial reports or misleading investors. Those companies should be punished by criminal law. The bigger problem is the quality of management and their working philosophy. Investors are tightening their purses and asking more questions about the quality of the management. They are staying away from troubleprone sectors, such as agriculture.
Cautious investors are asking tougher questions about management quality and governance, says JPMorgans Fang Fang.
When a client comes to you for IPO advice, what are their main concerns? Their first question is usually this: what kind of assessment criteria will an investor use to understand my company? The second question would typically be about timing and valuation; with the third set of questions relating to the regulatory and legal aspects of an IPO. The cost of the process is also an issue. The tougher IPO market hasnt changed our answer to the first question; typically we would talk about company positioning, the general trends in the industry, business models and so forth, but our message on timing and valuation has changed. We tell companies that investors are more cautious about giving high valuations to IPO candidates and will ask more questions, especially about their projected earnings and so forth. When you look at the companies in your IPO pipeline, what trends do you see? Well, they generally come from all sorts of business sectors, but Ive noticed two sectors that are not producing many IPO candidates right now. The first is real estate. There was not one real estate IPO, not even an attempted IPO, in 2011. Thats a result of economic tightening and government policy. The other sector where weve not seen big ticket IPOs is the internet technology sector. Thats a bit of a surprise. In the early part of 2011 we saw quite a lot of activity, with lots of ecommerce and social networking companies looking for IPOs; then the market deteriorated rapidly for tech players, and their own business performance has deteriorated significantly, too. How do you see the IPO market performing in 2012? We are cautiously optimistic about the prospects of the IPO market for Chinese companies this year. We are cautious because we think the global environment will continue to be volatile. The sovereign debt crisis in Europe and slow business growth in US are hurting sentiment, but we are optimistic because we think the Chinese economy will continue to grow by over 8% this year. We believe that domestic consumption will continue to grow nicely and companies will increase their competitive spend. We also think well see better management teams in place for Chinese companies. We believe the first half of 2012 will continue to be marred by the sovereign debt issues in Europe, but probably into the second half of the year these issues will be sorted out or at least people will have found a way to solve them.
A delay to the IPO can give management more time to develop the business, making it more attractive to investors.
12
Asia
Interview: Daniel Ng
Cautious optimism
What key trends affected Chinas IPO market last year and what do you think the key trends will be this year? The crisis in the Eurozone has really affected investor sentiment, especially with regard to IPO valuations. Gone are the heydays when a company could demand fantastic multiples. Also, the US economy didnt recover in the way people expected; its actually been quite slow. Chinas markets will gradually bounce back, but I dont think we are going to see the sort of IPO valuations weve seen in the past. Investors are getting very realistic; more savvy. They are not just buying a company because it sounds great and has a great investment story. If investors are being a little more discerning, what do you think will be the hottest sectors or types of companies coming to the IPO market? The consumer sector is probably going to be the hottest one for investors to look at, along with resources. I think well also see some very interesting companies in the renewable or alternative energy area; there are a lot of state incentives to encourage green energy. We are also seeing quite a lot of interest in the health care area. We saw a lot of small to mediumsized deals coming to the market last year, but many potential issuers suspended their IPO plans because the valuations on offer didnt make a lot of sense. We were seeing low singledigit multiples on public markets, which is very rare and is more of a private market multiple. There are a lot of strong companies that have alternative financing options and are willing to wait for a better IPO environment.
Managing Director and Vice Chairman, Investment Banking Division at BOC International, a whollyowned subsidiary of Bank of China Ltd.
Investors are still hungry for Chinese IPOs, but they will be more selective this year, says BOC Internationals Daniel Ng
Has that created an unusually big pool of companies that want to get deals accomplished this year? Can the markets absorb that number of transactions? Yes, but investors will be more selective this year. Deals that are better packaged and structured, that have sensible valuations and a very good story in a good sector theres greater likelihood of them getting an IPO done and raising the funds they want. Investors however, will look more closely at the corporate governance structures and practices of IPO candidates they are far more attuned to that. Overall, I think investors will be more practical about valuations and more meticulous about scrutinizing companies. Mainland Chinas equity markets were among the worst performers globally last year. How do you explain the poor performance? The Mainland Chinese markets are very different to the Hong Kong markets. I think for the markets in Shanghai and Shenzhen, in addition to the European nervousness, there were domestic drivers of volatility. These markets have been quite jittery for a long time. There are a lot of retail investors and a lot of speculators. But thats understandable; the markets are still in a very early stage of development. As to 2012, Im cautiously optimistic. I think there is a bit of stability in the Eurozone and I think we are seeing positive figures coming up from the US in terms of unemployment and growth. We are even seeing growth in Japan. I think the Hong Kong market has come down a long way, so there is room for an increase in terms of valuation. For Mainland China, I think there will be a focus on domestic consumption and a relaxation of monetary policy to encourage economic growth. Do you see Chinese companies changing the way they think about an IPO and how it fits into their growth plans? Yes, I do. I think they are more sensitive to what they need to do if their IPO is to succeed, not just as an initial fundraising but in the aftermarket too. They are using the IPO partly as a fundraising platform, and I dont think any of them will want their shares to tank after listing. So I think they will probably be more sensible in terms of the aftermarket performance and will not be asking for ridiculous or aggressive valuations. They need to be more aware of what the investor community expect in terms of corporate governance, transparency and disclosure. But that is a good thing for companies and for the market overall. It will mean we get higher quality companies and better senior management coming to the market.
Companies are more sensitive about what they need to do if their IPO is to succeed.
13
Asia
India
Fresh capital to fuel growing consumerism
Indias IPO markets are well placed to recover, once the global economy improves
Strong pipeline. After a solid performance in 2010, Indias IPO market was quiet last year. Worries about the global economy, receding growth and a lackluster secondary market dampened investor enthusiasm for newly listed companies; 80% of recent IPOs traded at a discount in 2011. That affected new issues, with almost no new IPOs coming to the market. Listings worth around US$7b were either scrapped or deferred, but the IPO pipeline is strong; 91 companies have filed a draft prospectus with the Securities and Exchange Board of India. A conscious government. Steps have been taken to revive interest in the primary markets, and this government initiative should improve the situation. Foreign nationals are now allowed to invest in equities directly, with the regulator also taking steps to make the stock market more investorfriendly. We expect such measures to help the IPO market and that once global sentiments have turned positive, the already prominent foreign institutional investment in India will be further encouraged. The fundamentals are solid. Shortterm concerns aside, the growth prospects for companies in India are good and there is a healthy appetite for capital. The government is likely
The growth prospects for companies in India are good; there is a healthy appetite for capital.
R. Balachander, India IPO Leader, Ernst & Young
to list some large stateowned companies in 2012, which will help to improve market sentiment, as the shares are likely to be available at a discount to retail investors.
Figure 14: India IPO activity by year

102
73 63 52 36 20 $3 $2 $6 $8 $5 20 $4 $8 $1 2011 39
2004
2005
2006
2007
2008
2009
2010
Number of deals
Figure 15: Key India IPO statistics

2009 Bombay and National stock exchanges (number of deals)
1
2010 63 (2 15% )
2
2011 39 (3 8%3) $1.2b (8 6%3) $30.7m Materials (9) Financials (6) Financials ($609.2m) Materials ($133.5m)
20 $4.1b $203.4m Energy (5) Media and entertainment (3) Energy ($3.4b) Media and entertainment ($0.2b)
Bombay and National stock exchanges1 (capital raised (US$)) Average deal size (US$) Top two sectors (number of deals) Top two sectors (capital raised)
1 2 3
$8.3b (1 02%2) $132.5m Industrials (17) Materials (11) Materials ($3.9b) Industrials ($1.7b)
Most IPOs by Indian issuers are duallisted on Bombay and National stock exchanges. Percentage change from 2009 to 2010. Percentage change from 2010 to 2011.
Figure 16: 2011 top 3 India IPOs by capital raised

Issue month
Aug May Mar
Issuer name
L&T Finance Holdings Ltd. Muthoot Finance Ltd. PTC India Financial Services Ltd.
Sector
Financials Financials Financials
Issuer business description

Provider of financial products and services across corporate, retail and infrastructure finance sectors Gold loan company Financial services company

279 202 97
Exchange(s)
Bombay, National Bombay, National Bombay, National
Based on IPO activity on Indian exchanges. Source for all charts and tables shown: Dealogic, Thomson Financial, Ernst & Young.
14
Are you ready?

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Americas
United States
A waiting game
With volatility here to stay, timing is everything

IPO market cooled after a strong start. The US IPO market started 2011 in an upbeat mood, but activity dried up in the second half of the year. Europe's debt worries, other nations exhibiting slower economic indicators and a volatile equity market were investors main concerns. Nonetheless, total funds raised fell from 2010 by only 8% to US$40.2b in 2011. Pipeline is robust. With the markets volatile and valuations uncertain, the number of IPOs fell in 2011 from the previous year by 24% to 124, but we expect to see this number increase significantly in 2012. There is a strong pipeline of approximately 200 companies ready to list once conditions stabilize. Hot sectors include technology, real estate, oil and gas, pharmaceuticals and consumer retail. We also expect to see a solid level of IPO carveouts and spinoffs in 2012. The largest company in the pipeline today is the much anticipated IPO of Facebook. Other recognizable names planning to access the US capital markets include Ally Financial, Fender Musical Instruments, Kayak.com, Norwegian Cruise Lines and Toys R Us, to name a few. US capital markets ramp up for the JOBS Act. In an effort to boost job creation and economic growth, the Jumpstart Our Business Startups Act (JOBS Act or the Act) was enacted on 5 April 2012. The JOBS Act eases some of the regulatory requirements on companies seeking access to capital from both the US private and public markets. The Act creates a new category of issuer called an emerging growth company1 that would be able to offer stock through an IPO and phase in certain SEC reporting requirements. Private companies would get greater access to funding without triggering public reporting requirements. It also would increase the shareholder threshold for mandatory registration and expand Regulation A offerings up to US$50m. The Act would also allow private companies to raise money through crowdfunding in certain circumstances. Companies preparing earlier. Markets are likely to remain unpredictable throughout 2012. In response, we see IPO candidates adopting a get ready early, then wait approach. Usually, staying in the pipeline for several months without bringing a deal to the market would be a sign of weakness, but in the current environment, that is not the case. Investors no longer penalize companies that file their IPO intentions and then wait for the optimum moment to list. The imperative is to move fast once a market window opens. Internet and social media companies showed the way. Many of the successful IPOs we saw in 2011 involved companies from this sector. This partially reflects the USs growing dependence on the products and services provided by social media and internet companies. The average market value for US social media companies at the time of their IPO was double the average market value of firms from other sectors. This also reflects the fact that these companies tended to float smaller percentages of their shares (typically 10% to 15%); we expect this to continue. Private equity stepped up to the plate. The number of IPOs backed by private equity firms fell in 2011, reflecting the lower number of deals across the market as a whole, although the number of completed private equity listings as a proportion of total IPOs actually increased. 2011 saw the largest PEbacked IPO ever the US$4.4b IPO of the USs largest hospital chain operator, HCA Holdings Inc. Moreover, private equity firms were behind eight of the ten largest IPOs. We expect this trend to continue in 2012 as private equity plays an increasingly important role in the IPO market. In addition, venture capital backed companies represented 26% of US IPOs by capital raised (US$10.3 billion via 52 deals). Strong foreign appeal. With the continued economic difficulties in Europe, we expect more European companies listing on US markets in 2012. The same applies to those from China, even though their equity markets are maturing rapidly. In 2011, Chinese companies made up 11% of US IPOs by number of deals and 5% by capital raised (US$2.1b in 14 deals), while European companies comprised 3% of US IPOs by number of deals and 5% by capital raised (US$1.9b in 4 deals). 16 Global IPO trends 2012
Americas
Figure 17: US IPO activity by year

227 228 210 219
163 124
We are bullish about the prospects for 2012. The pipeline is strong and market conditions are improving.
Jacqueline Kelley, US IPO Leader, Ernst & Young
67 37 $48 $41 $46 $52 $27 $27 $44 $40 2011
2004
2005
2006
2007
2008
2009
2010
Number of deals
Figure 18: Key US IPO statistics

2009 Number of deals Capital raised (US$) Average deal size (US$) PEbacked IPOs (number of deals, capital raised) Top five sectors (number of deals) 67 $27.3b $406.9m 28 deals, $9.0b High technology (12) Health care (9) Real estate (9) Industrials (8) Financials (5) Financials ($10.5b) High technology ($3.2b) Real estate ($2.9b) Health care ($2.2b) Energy ($1.4b) 35 deals, $19.1b 30 deals, $8.1b 1 deal, $2m 2010 163 (1 43%1) $43.5b (5 9%1) $267.1m 84 deals, $15.2b High technology (35) Health care (21) Financials (20) Industrials (17) Energy (14) Industrials ($22.0b) High technology ($4.9b) Financials ($4.1b) Energy ($3.5b) Real estate ($2.0b) 82 deals, $34.7b 76 deals, $8.7b 5 deals, $94.5m 2011 124 (2 4%2) $40.2b (8 %2) $324.3m 56 deals, $26.7b High technology (33) Energy (25) Health care (16) Consumer products (9) Real estate (9) Energy ($9.3b) High technology ($8.1b) Health care ($5.9b) Consumer products ($3.9b) Retail ($3.8b) 67 deals, $30.5b 54 deals, $9.6b 3 deals, $103m
Stock exchanges: NYSE NASDAQ AMEX (number of deals, capital raised)

1 2
Percentage change from 2009 and 2010. Percentage change from 2010 and 2011.
Figure 19: 2011 top five US IPOs by capital raised

Issue month
Mar Feb
Issuer name
HCA Holdings Inc. Kinder Morgan Inc.
Issuer domicile
US US
Sector
Health care Energy

Operates hospitals and surgery centers Transportation and storage of natural gas, refined petroleum and crude petroleum An information and measurement company that provides data on consumers' preferences and behavior Operator of fastfood restaurants; McDonalds franchisee Russian internet and search company

4.4 3.3
Exchange(s)
New York New York
Jan
Nielsen Holdings NV
US
Consumer products Retail High technology
1.9
New York
Apr May
Arcos Dorados Holdings Inc. Yandex NV
Argentina Russian Federation
1.4 1.4
New York NASDAQ
An emerging growth company (EGC) is defined as an issuer with annual revenues of less than $1b in its most recent fiscal year. A company would be eligible for EGC status for five years after its IPO, but would cease to qualify if it (1) issued more than $1b in non-convertible debt in a threeyear period, (2) became a large accelerated filer (i.e., market capitalization greater than $700m) or (3) had annual revenues exceeding $1b.
Based on IPO activity on US exchanges (NYSE, NASDAQ and AMEX). Source for all charts and tables shown: Dealogic, Thomson Financial, Ernst & Young.
17
Americas
Interview: Tom Fox

Head of Global Capital Markets, Americas, at UBS
Waiting for a window

What were the three big trends affecting the US IPO market last year? The most prominent trend was the increase in volatility in the equity markets, which hurt the IPO market. That was caused by a number of factors; probably the preeminent one was the sovereign debt crisis in Europe, particularly in Greece. The second trend was the proportion of IPOs floated by private equity. That reached an alltime high: 65% of the dollars raised in the IPO market were connected to private equity and financial sponsors, versus the 30% to 40% wed see in a regular year. The third trend was how difficult it was to time the IPO market. Some 55% of the fundraising last year took place in only 7 of the 52 weeks; that just shows you how quickly the market opened and closed. What do you think will be the three big trends driving the market this year? Well probably see a continuation of last years trends. Volatility has dropped off a little bit, but much like we saw in 2011, there are going to be windows of opportunity that are going to open and close. There will be reduced levels of issuance, uncertainty as to whether companies will achieve their pricing objectives and varied performance in the aftermarket causing concern about transaction attractiveness. Well need to see a series of transactions that meet the objectives of both sellers and buyers in order to create an attractive backdrop for a flourishing IPO market. The pipeline is pretty healthy. Its not the biggest backlog weve seen, but it is the oldest a number of companies have been in registration for an extended
IPO candidates should get ready early and bide their time, says Tom Fox of UBS.
period, in some cases for 9 or 12 months. This year, I think companies will continue to file IPOs in anticipation of perhaps being in registration for an extended period. They will get into a position to go public and then wait for the right time. If a company sits in registration without doing a deal, doesnt that reflect badly on the business? Not anymore. We now have private equity firms that are filing documents to go public for companies that dont even assign underwriters. When the market turns for that company or its sector, theyll be in a position to move quickly. When companies talk to you about bringing an IPO to the market, what kind of questions are they asking you? Their overwhelming concern is certainty of execution. They are worried about the number of deals being pulled and they are right to worry; 2011 was a record year for deals being postponed or withdrawn. Theres nothing worse that could happen to a prospective candidate than to fail at going public. A failure to execute the listing would suggest that people dont believe in the enterprise and its prospects. That could have severe business ramifications. We tell candidates to make sure they are sound about their story, valuation thesis and positioning and that they understand what an attractive market would be, what the likelihood of success is in such a market and what the likelihood of success is in the event they get stuck in a market thats less than attractive.
Thats a big change. Their main worry a few years ago would have been more valuationoriented; execution risk was never a primary concern, but weve never experienced levels of volatility like those weve seen over the past couple of years. When will the IPO market return to normal? You cant have an active new issue market if the overall market is underperforming; it just cant happen. So you need some outperformance in the overall market, for one. Two, you need volatility reduced consistently Id say the VIX Index needs to be around 20 or below for a solid period. Thirdly, we need to see some consistency in sellers achieving their price objectives, i.e., floating in or above their desired price range; as well as seeing buyers achieve relatively attractive outperformance in terms of how IPOs trade relative to the market. Both sellers and buyers need to feel they are getting value from participating in the IPO process.
The main worry a few years ago would have been more valuation oriented; execution risk was never a primary concern.
18
Americas
Brazil
Private equity leads the way
Solid economic growth could drive a doubling of IPO activity this year
Brazils IPO market suffered in 2011. Despite being one of the most attractive emerging markets right now, with a strong GDP growth rate of 4%, IPO funds raised fell by a third to US$4.4b. There were 11 deals in the year, of which all but 1 listed in the first six months. Nine of the IPOs that succeeded were backed by private equity funds. In total, 13 companies registered their plans to go public and only 2 changed their minds. Many of them sought private equity finance instead. On the upside, interest rates fell and inflation was brought under control. IPO activity will pick up significantly this year. We expect to see around 20 successful deals, about twice the number that listed last year. There are several private equity IPOs in the pipeline and some multinational companies are likely to list their Brazilian subsidiaries. Many companies want to go public in Brazil and they are just waiting for the right moment since they were sidelined by global markets problems last year, including the European crisis and slower global economic growth. We could also see more South American companies from outside Brazil attempt an IPO and more activity on Bovespa Mais, the market for smallercap companies.
The IPO markets were quiet in 2011, but we expect to see a strong recovery in 2012.
Paulo Sergio Dortas, Brazil IPO Leader, Ernst & Young
Hot sectors will be services, oil and gas and infrastructure, because the country is hosting the 2014 football World Cup and the 2016 Olympic Games, which requires strong investments in many sectors.
Figure 20: Brazil IPO activity by year

63
28 5
$1
$28
$13
6
$2 $8
4
$5
6 2009
11
$6
11
$4
2004
2005
2006
2007
2008
2010
2011
Number of deals
Figure 21: Key Brazil IPO statistics

2009 So Paulo Stock Exchange Number of deals So Paulo Stock Exchange Capital raised (US$) Average deal size (US$) Top three sectors (number of deals) Top three sectors (capital raised)
1 2
2010 11 (8 3%1) $6.4b (5 1%1) $580.6m Industrials (4) Energy (2) Real estate (2) Industrials ($2.8b) Energy ($1.6b) Real estate ($0.9b)
2011 11 (03) $4.4b (3 1%3) $401.1m Retail (4) Consumer products (2) Energy (1) Retail ($1.4b) Energy ($905m) Health care ($676m)
6 $13.1b3 $2.2b Financials (3) Health care (1) High technology (1) Financials ($12.2b) Health care ($0.4b) High technology ($0.3b)
Percentage change from 2009 to 2010. Percentage change from 2010 to 2011. 3 Includes 2009s largest IPO, Banco Santander Brasils $7.5b listing on the NYSE and Bovespa.
Figure 22: 2011 top five Brazil IPOs by capital raised

Issue month
Feb Jun Apr Jan Apr
Issuer name
QGEP Participacoes SA Qualicorp SA Magazine Luiza SA Arezzo Industria e Comercio SA T4F Entretenimento SA
Sector
Energy Health care Retail Consumer staples Consumer products

Oil and gas exploration company Fullservice health care benefits administrators and health management services providers Household appliances and electronics retailer Womens shoes and sandals manufacturer Live entertainment company

905 676 566 336 319
Exchange(s)
So Paulo So Paulo So Paulo So Paulo So Paulo
Based on IPO activity on So Paulo Stock Exchange. Source for all charts and tables shown: Dealogic, Thomson Financial, Ernst & Young.
19
EMEA
Europe
A bumpy road ahead
Continued volatility is the theme for 2012, as Europe tries to solve its debt problems
Europes IPO markets were encouragingly resilient in 2011. The amount of funds raised across the regions markets fell by 19% to US$29.7b, but the number of successful listings actually increased by 6% to 266 deals. As with other IPO markets around the world, most of the activity took place in the first half of the year. Performance varied enormously at a country level. The IPO market in Poland was very active. There were 22 listings on the Warsaw Stock Exchanges increasingly mature main market and a record 123 on NewConnect, its market for younger technology businesses. In France, by contrast, 2011 saw the lowest total capital market financing including not only IPOs since 1995. Activity was also slow in the UK, which is normally the regions IPO powerhouse. No quick fix to economic troubles. Europes sovereign debt crisis weighed heavily on its IPO markets last year. The fear that Greece might default on its debts, added to the inability of European policymakers to find a way forward, has damaged sentiment. But as we move into 2012, there is greater confidence that, while a oneoff fix may not be found, there is at least a growing consensus about how to deal with the problem. IPO candidates will need to be more flexible. Market volatility is likely to reduce somewhat in 2012, but it will still be difficult for companies to get the timing of their IPOs right. Companies, advisors and investors will need to find a way to navigate this highly fluctuating market to find common ground, particularly concerning pricing. Trends we expect to see in the market are: companies floating a smaller percentage of their equity; larger syndicates, so that companies are marketing to a broader investor base; more focus on earlier marketing; as well as efforts to find anchor investors. Companies will follow the money. As conditions in Europe remain unpredictable, we may see more IPO candidates looking to float on an overseas market, perhaps as a dual listing. Certainly, candidates will question whether they should simply list on their home market by default. Many will have good strategic reasons for listing abroad, especially those that want to develop awareness of their brands in Asia. We are likely to see emerging markets actively competing to attract European companies. An increasingly important goal will be to combine a companys business strategy with financing strategy. The purpose of a stock exchange. Offexchange transactions represented more than a third of equity traded in Europe last year. With so much activity bypassing traditional markets, we may see more IPO candidates looking at alternative ways of raising equity finance. New intermediaries such as crowdfunding portals are giving companies direct access to investors and important newcomers like multilateral trading facilities entering the listing space, for example, could become increasingly popular in primary markets.
20
EMEA
Figure 23: European IPO activity by year

609 587
397 301 252 201 266
IPO candidates will need to be flexible this year, keeping an open mind about when they list, and where.
Dr. Martin Steinbach, EMEIA IPO Leader, Ernst & Young
$109
$100
$34
$67
$37
$7
$7
2004
2005
2006
2007
2008
2009
2010
2011
Number of deals
Figure 24: Key Europe IPO statistics

2009 Number of deals Capital raised (US$) Average deal size (US$) PEbacked IPOs (number of deals, capital raised) Top five sectors (number of deals) 62 $7.4b $119.4m 3 deals, $0.8b Industrials (16) Materials (7) Financials (7) Real estate (6) Health care (5) Energy ($2.3b) Financials ($2.2b) Industrials ($1.6b) Real Estate ($0.6b) Materials ($0.2b) 2 deals, $0.7b 7 deals, $0.6b 3 deals, $3.1b 1 deal, $7m 3 deals, $78m 2010 252 (306% )
1
$30
62
2011 266 (6 %2) $29.7b (1 9%2) $111.6m 11 deals, $2.8b Consumer products (44) Industrials (41) Materials (30) High technology (26) Energy (25) Materials ($13.3b) Financials ($6.4b) Energy ($2.8b) Industrials ($2.7b) Consumer staples ($1.3b) 9 deals, $13.9b6 33 deals, $820m 1 deal, $82m 11 deals, $95m 14 deals, $2.3b
$36.7b (3 96%1) $147.2m 18 deals, $9.5b Materials (31) High technology (29) Consumer products3 (28) Industrials (28) Consumer staples (26) Energy ($8.3b) Materials ($6.4b) Financials ($5.9b) High technology ($3.8b) Retail ($3.5b) 18 deals, $8.9b 40 deals, $1.5b 5 deals, $2.7b5 5 deals, $66m 14 deals, $3.1b
Stock exchanges: London Market London AIM Euronext Alternext Deutsche Brse4 (number of deals, capital raised)
1 2
Percentage change from 2009 to 2010. Percentage change from 2010 to 2011. 3 Consumer products include consumer services. 4 Deutsche Brse consists of listings on General, Prime and Entry standards. 5 Includes Russias United Co. Rusal Ltd. US$2.2b IPO, which is duallisted on Hong Kong Stock Exchange and Euronext. 6 Includes Swiss commodities trader Glencore Internationals US$10b IPO, which is duallisted on London and Hong Kong stock exchanges in May.
Figure 25: 2011 top five Europe IPOs by capital raised

Issue month
May Jul Jul Jul Apr
Issuer name
Glencore International plc Bankia JSW SA Banca Civica SA Nomos Bank New Moscow Bank ZAO
Issuer domicile
Switzerland Spain Poland Spain Russian Federation
Sector
Materials Financials Materials Financials Financials

Diversified natural resources group Commercial bank Coal producer and distributor Commercial bank Commercial bank providing retail and merchant banking services

10 4.4 1.9 0.9 0.8
Exchange(s)
London, Hong Kong Madrid Warsaw Madrid London
Based on IPO activity on European exchanges. Source for all charts and tables shown: Dealogic, Thomson Financial, Ernst & Young.
21
EMEA
Interview: Georg Hansel

Chairman of EMEA Equity Capital Markets at Deutsche Bank
Open for business?

How do you assess the performance of Europes IPO market in 2011? The key trend last year was that the market did not manage to find an equilibrium; there wasnt a good balance between investor demand for IPOs and supply. In that regard, we havent had a proper IPO markets since 2007. In 2012, Im hoping that the market will continue to stabilize and well see a reversal of that trend. Already this year weve seen market volatility come down and investor confidence grow. Were seeing many potential issuers starting to reengage in their preparations for an IPO. Remember, there is a big backlog of very substantial IPOs that are keen to come to the market as soon as it is open. I think that once there have been a couple of successful listings, well see a big wave of IPOs hitting the market. What would indicate a return to a normal market and when do you think that might happen? We need to see a decent number of IPOs coming back to, say, 2007 levels, with some of them pricing towards the top end of their range. If you look back to various historic IPO cycles, it takes a few very successful IPOs that show superior returns in the aftermarket to reengage investors. That encourages broader books, with a couple of hundred investors participating in an IPO and not just a few dozen. That then breaks the power of individual investors, resulting in more balanced deals. You also need good quality names coming to the market.
A few successful IPOs are needed to restore investor confidence, says Deutsche Banks Georg Hansel.
So its not just a question of the wider economic environment needing to improve? You do need support from the broader market, but that alone will not give you a great IPO market. You need some successful deals. A portfolio manager should not have to justify a decision to invest in the IPO asset class, it should be a normal part of his business. An IPO should not be regarded as something that is, by definition, an investment with a high risk relative to returns. What trends do you see in the meantime? I expect to see a continuation of corporate spinoff IPOs, with larger conglomerates offloading operations in an attempt to focus on their core business. There will always be a stream of sponsorled IPOs, but the sponsors might wait a bit longer before they come back to the market. I think well see more IPOs coming from Europes emerging markets; there are some very good companies in Eastern Europe lining up to hit the market as soon as investor appetite improves. Do you see more European companies taking their IPOs to the US or Asia instead? We are seeing some of that, but not on a big scale. Technology companies might go to the US because there is a very differentiated and large investor base. Weve seen some US tech IPOs happening at good valuations, with good subscription levels. Weve also seen some IPOs in the luxury brand category, like Prada and a couple of others, go to Hong Kong, but not too many. These are brands that enjoy very high name recognition and high sales growth in China and Southeast Asia, so they can attract good valuations in Hong Kong. They need to have a story with a very specific Asian angle in order to be successful. Whats your outlook for the Middle East? Political unrest in the region created a lot of noise and uncertainty last year, which basically stopped issuance activity; whenever there is a wider downturn, emerging markets always suffer more. Thus, the appetite to invest into these regions was almost nonexistent. This year will be different. I think the political unrest is ending in most countries. Were already seeing a lot of interest about emerging market investment. It may take some time for that to develop into a trend, but once we see more inflow into emerging market funds and regional funds, well have the conditions needed for IPOs to be successful. We already have a number of mandates with highquality assets.
An IPO should not be regarded as something which is, by definition, an investment with a high risk relative to returns.
22
EMEA
Interview: Klaus H. Hessberger

CoHead of Equity Capital Markets in EMEA, at JPMorgan
Are you ready?
European companies planning an IPO must be ready to move more quickly, says JPMorgans Klaus H. Hessberger.
What were the main trends in the IPO market last year? It was a year of two halves. In the first, we saw a lot of IPOs and other equity capital market transactions launched. There were 26 deals of over US$200m in Europe, the Middle East and Africa. In the second half of the year we saw none on that scale. Even among those 26 deals, some of them were special investment vehicles, not traditional IPOs. We also noticed that investors were even more selective about IPO quality and the story behind the business. In 2010, they would at least look at most deals; in 2011, they took a binary approach they would scrutinize a deal in great detail, or not even consider it. Another important trend is that the window inside which a company can get an IPO away can be very short, can open and close very suddenly and can remain closed for a long time. We saw this in 2010, but last year it became more pronounced. Id say the market in 2011 was open for five or six months and then shut for six months. If the IPO window keeps opening and closing, why is that the case? Its a question of volatility. Every time there is a macroshock or something to hurt investor confidence, the markets become more volatile. That increases the risk for IPO investors in the bookbuilding phase and they want to see a discount for that risk in the pricing. The higher the volatility, the greater the discount they will demand. The VIX Index has been a good indicator of whether the European IPO market is open (The VIX, the socalled Fear Index, tracks volatility on the S&P 500). When it goes above 20%, it is much harder to get an IPO away. Since July 2011, the VIX has been above 20%, trading as high as 45% until Christmas. The challenge has been that buyers and sellers views on risk discounts and valuation have been too far apart. What are the implications for a company that wants to do a deal? Companies thinking about an IPO need to educate their target investors much earlier in the process. They have to spend more time on socalled anchor marketing, telling their story to investors, explaining that they have a solid story, strong track record and a good management team. They need to secure buyin, which they can build on quickly once a favorable market window opens. We have seen this already in 2010, when we launched the IPO of Chr. Hansen Holding within a short market window before the summer break. What will be the main IPO market trends for 2012? Number one, I expect the volatility to continue. The market windows will open and close quickly; it probably wont be like 2011, where the IPO market was effectively closed for the second half. Second, I think well also see some carveout IPOs or spinoffs this year, where companies unload noncore assets, rather than mostly sponsordriven IPOs. Third, well see Europe taking more of a USstyle approach to IPO marketing the process will be condensed and quicker, reducing the market exposure. Looking at the companies in your IPO pipeline, what are their main concerns about coming to the market? They want to know they will achieve a reasonable valuation and they want some sense of confidence about that before they go out to investors. Also, they need to access IPO funding to finance their capital expenditure and growth plans, so they are considering whether they might go for a smaller listing than they would have done in a more bullish IPO market. They are maybe looking at floating only 15% to 20% of market capitalization, where once they might have aimed for 30% to 40% as a minimum float. The option is to bite the bullet on valuation and accept the market pricing, reduce the size of the float to get it out and listed, and then do follow on placements later. Whats the IPO picture in the Middle East and how has the Arab Spring changed the way you look at the region? Corporate governance and political stability remain key focus points. A successful IPO needs to be a sizable company with a strong story that can benchmark itself against European peers. Most will also take a listing in the US, London or an Asian market to add some quality. Weve also seen companies using preIPO convertible financing structures while they wait for the listing environment to improve. The Arab Spring underlines the need to take a countrybycountry view of the region, as they are all very different. Weve always looked at the Middle East that way, so theres no change in that regard.
The challenge has been that buyers and sellers views on IPO valuations have been too far apart.
23
EMEA
Middle East and Africa

Saudi Arabia leads the way
Political turmoil and market volatility made 2011 a difficult year for companies seeking IPO finance
Poised for recovery? The Middle Easts IPO scene stalled last year as issuers and investors worried about market volatility, economic uncertainty and the consequences of political change. Total funds raised stood at US$929.9m in 2011, a 68.5% decline on 2010. But the number of IPOs in the pipeline across the region continues to grow. When the economic outlook improves and investors regain their confidence, theres the potential for a flood of deals. Islamic financing is strong. With the IPO markets effectively closed in some cases, the regions growth companies increasingly turned to other sources of capital. Islamic funding such as Sukuk a form of bond saw a record year and was the preferred funding option for many growth businesses. Saudi Arabia was the leading IPO market. Saudi Arabia raised the most money overall US$417.8m and saw the secondlargest IPO on a Middle East exchange. Africa saw 14 IPOs worth US$886m in 2011, with 4 South African deals in the real estate and consumer products sectors driving activity.
Islamic finance saw a record year and was the preferred funding option for many growth businesses.
Azhar Zafar, Middle East and North Africa IPO Leader, Ernst & Young
Figure 26: Middle East and Africa IPOs by year

179
78 47 72 22 $19 $15 $8 $9 $2 $5 $2 2011
48
31
10 2004 $1 2005 2006
2007
2008
2009
2010
Number of deals
Figure 27: Key Middle East and Africa IPO statistics

2009 Number of deals Capital raised (US$) Average deal size (US$) Top two sectors (number of deals) Top two sectors (capital raised) Stock exchanges: Riyadh Qatar Tel Aviv Johannesburg (number of deals, capital raised) 22 $2.4b $109.6m Financials (12) Telecommunications (4) Telecommunications ($1.1b) Energy ($0.6b) 11 deals, $1.0b 1 deal, $1.0b 1 deal, $22m 2010 48 (1 18%) $5.0b (1 08%) $103.3m Financials (7) Industrials (8) Materials ($1.2b) Real estate ($1.0b) 9 deals, $1.0b 1 deal, $144m 17 deals, $0.9b 5 deals, $1.4b 2011 31 (35%) $1.8b (64%) $58.6m Consumer products (7) Financials (6) Real estate ($ 778m) Consumer products ($277m) 4 deals, $418m 7 deals, $171m 4 deals, $670m
Figure 28: 2011 top three Middle East & Africa IPOs by capital raised
Issue month
May May Aug
Issuer name
Rebosis Property Fund Ltd. Eshraq Properties Co. Dipula Income Fund Ltd.
Issuer domicile
South Africa United Arab Emirates South Africa
Sector
Real estate Real estate Real estate

Real estate investment company Real estate property development company Commercial real estate investments

246 229 207
Exchange(s)
Johannesburg Abu Dhabi Johannesburg
24
Private equity
Private equity
A tale of two markets
Private equity deals represent a growing part of the IPO market

Private equity (PE) made a record contribution. After an active 2010, which saw 155 PEbacked companies raise more than US$35b, the PEbacked IPO market continued to improve in the first half of 2011. With 70 companies raising US$31.4b in the first six months, the industry was on pace for its best year on record. However issuance took a dive midway through the year, as investor concerns about Europes sovereign debt issues, the US economy and Asian corporate governance hurt sentiment. Overall, PEbacked deals raised US$38.3b in 118 separate listings in 2011, accounting for 23% of global IPO proceeds the highest percentage on record. PEbacked companies raised record amounts. We saw a succession of recordbreaking PEsponsored deals listing in the US last year, despite the market gloom. In February, Kinder Morgan, a Texasbased pipeline operator, completed a US$3.3b IPO on the New York Stock Exchange (NYSE). The float was the biggest PEbacked IPO in history, until March, when HCA Holdings, the largest hospital operator in the US, went public on the NYSE to raise nearly US$4.4b. Pipeline grew as filings outpaced offerings. Filings for PEbacked IPOs have exceeded sponsored deals brought to market by a significant margin over the last two years. More than 160 companies have filed to go public since January 2011, leading to a rapid expansion of the sponsored pipeline. Currently, more than 80 companies have filed and are preparing to go public, which could raise more than US$20b in total. Add to that a sizeable shadow pipeline of companies that are interested in going public but have yet to file, and there is a long line of IPOs waiting for the right market conditions. Bright spots in emerging Europe. Activity dried up across Europes developed markets, but some of the regions emerging countries showed signs of life. In Poland, two PEbacked companies went public, raising US$173.1m, adding to the three which debuted in 2010. Further afield, we saw significant PEbacked deals in South Africa. Most deals achieved the desired price or better. Pricing generally improved for PEbacked deals compared to 2010. Some 76% of Americas and EMEA listings opened within or above their pricing range, against just 62% in 2010. Two factors account for this: the window for IPOs was wide open in the first part of 2011, and in the second half, many companies pulled deals to avoid pricing pressure when markets tightened. Opportunistic. Private equity firms will want to return monies to their investors so they will continue to look for exit opportunities. But theyll want to wait for the right market conditions. Most firms have spent years driving transformational change and making operational improvement in their portfolio businesses; they will want to realize the full value of their efforts. While there are signs in early 2012 that the market is coming back, particularly in the US, which has seen strong share performance by the NYSE and NASDAQ, PE will explore alternative exit routes if necessary to capture that value. Trade exits to cashrich strategic buyers and secondary deals with PE firms, seeking to deploy a measure of the industrys estimated US$365b in dry powder, will also be attractive options. Rise in Venture Capital (VC) backed IPOs. VC firms exited 141 companies via IPOs in 2011, raising US$17.3b a 26% increase by capital raised in 2010 (128 deals, US$13.7b). In China and India, IPOs represent the vast majority of exits for VC-backed companies. But in the US, Europe and Israel, the main exit route for VC-backed companies is acquisitions (M&A), representing more than 90% of all exits. Furthermore, VC firms are also selling companies to private equity firms as a third path to liquidity. We expect these trends to continue.
Source: Private equity, Public Exits, Ernst & Young, January 2012.
25
Private equity
Figure 29: Global PEbacked IPOs by region (by capital raised)

$20.0 $6.5 $23.4 $20.8 $15.8 $22.1 $10.2 $9.7 $17.1 $3.4 $2.3 $2.8 2004 Asia-Pacic 2005 2006 2007 EMEA 2008 $0.8 $5.7 $10.5 $2.9 $6.0 $29.9
$3.3 $0.3 $10.2
$8.2 $8.1 $16.4 $1.2 $0.9 $6.2 2001 $3.9 $0.7 $6.7 $2.5 $0.8 $7.0 2003
$14.5 $4.4 $21.3
2000
2002
2009
2010
2011
Americas In US$ billion
Figure 30: Global PEbacked IPOs by region (by number of deals)

55 28 97 59 41 97 57 67 100
20 11 43
40 30 82 9 6 29 13 10 38 6 12 30
22 51 95 4 33 10 4 21 34
12 43 64
2000
2001
2002 Asia-Pacic
2003 EMEA
2004
2005
2006
2007
2008
2009
2010
2011
Americas
Figure 31: 2011 PEbacked sponsored IPOs by industry (ranked by number of deals)
5% 2% 1% 11% 26% Technology 26% (31 deals/US$7.8b) Health care 13% (16 deals/US$6.7b) Consumer goods 12% (15 deals/US$5.0b) 11% 13% 12% 12% Materials 12% (14 deals/US$3.0b) Consumer and professional services 11% (13 deals/US$4.3b) Financials 11% (13 deals/US$4.5b) Industrials 7% (8 deals/US$1.4b) Oil and gas 5% (6 deals/US$2.2b) Telecom 2% (2 deals/US$0.4b) Utilities 1% (1 deal/US$3.3b)
7%
26
Private equity
We saw a succession of recordbreaking PEsponsored deals listing in the first six months of last year. However, the second half of the year saw a 77% decline in value of PEbacked IPOs as there was no escaping investor concerns over a worsening global economic outlook. In early 2012, there are signs that the market is coming back.
Jeff Bunder, Global Private Equity Leader, Ernst & Young
Figure 32: 20002011 global PE exits by deal value

Annual deal value (US$ billions)
2011 2010 2009 2008 2007 2006 2005 2004
Figure 33: 20002011 global PE exits by deal volume

Annual deal number 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 335 251 181 73 210 176 48 74 Strategic sales Secondary sales IPOs 140 61 36 44 625 532 366 434 626 543 570 227 48 334 320 152 75 59 190 47 381 197 180 224 233 261 168 119 1,005 933 500 671 1,231 1,074 1,070 714 439 315 290 298 $258.5b $262.2b $87.3b $150.2b
$170.4 $164.3 $58.5 $113.1 $146.0 $90.2 $143.9 $74.6 $60.7 $89.3 $11.7 $17.1
$49.3 $60.9
$38.8 $37.1
$28.3 $8.8 $156.9 $49.9 $68.8 $32.7 $40.2 $58.8
$361.6b $229.4b $253.0b $168.0b $72.0b $45.0b $53.3b $82.8b
2003 $31.2 2002 2001 2000
$30.5 $10.3 $18.6 $15.2 $11.2
$40.3 $58.3
$4.7 $8.4 $10.7 $13.8
Strategic sales (in US$ millions)
Secondary sales
IPOs
Strategic sales are sales to corporations while secondary sales are sales to other PE firms.
Figure 34: 2011 top PEbacked IPOs by capital raised

Issue month
Mar Feb Jan
Issuer name
HCA Holdings Inc. Kinder Morgan Inc. Nielsen Holdings NV
Issuer domicile
United States United States United States
Sector
Health care Energy Consumer products and services Retail High technology Retail High technology Consumer products and services Financials High technology

Operates hospitals and surgery centers Transportation and storage of natural gas, refined petroleum and crude petroleum An information and measurement company that provides data on consumers' preferences and behavior Operator of fastfood restaurants; McDonalds franchisee Russian internet and search company Engaged in the design, marketing and sale of travel, business and causal luggage Online social gaming company Provider of support in commercial fleet aircraft leasing, purchasing and financing needs Commercial bank Manufacturer of semiconductors

4,354 3,294 1,889
Exchange(s)
New York New York New York
Apr May Jun Dec Apr
Arcos Dorados Holdings Inc. Yandex NV Samsonite International SA Zynga Inc. Air Lease Corp.
Argentina Russian Federation United States United States United States
1,437 1,435 1,297 1,000 923
New York NASDAQ Hong Kong NASDAQ New York
Jan May
BankUnited Inc. Freescale Semiconductor Holdings I Ltd.
United States United States
900 883
New York New York
27
Appendix: definitions
IPO definition: This report only focuses on initial public offerings (IPOs) of operating companies. An IPO is defined as a companys first offering of equity to the public. Comment: This report includes only those IPOs for which the data providers Dealogic, Thomson Financial and Ernst & Young offer data regarding the issue date (the day the offer is priced and allocations are subsequently made), the trading date (the date on which the security first trades) and proceeds (funds raised including any overallottment sold). Postponed IPOs or those which have not yet been priced are therefore excluded. In an attempt to exclude nonoperating company IPOs such as trusts, funds and special purpose acquisition companies (SPACs), companies with the following Standard Industrial Classification (SIC) codes are excluded: 6799: Special Purpose Acquisition Companies In our analysis, unless stated otherwise, IPOs are attributed to the domicile nation of the company undertaking an IPO. Capital raised is captured in US dollars (US$). The primary exchange on which they are listed is as defined by Dealogic, Thomson Financial and Ernst & Young research. A foreign listing is where the stock exchange nation of the company is different from the companys domicile nation (i.e., issuers nation). For IPO listings on HKEx, SSE, SZE, WSE, NewConnect, TSX and TSXV exchanges, we use their first trading date in place of issue date.
6091: Financial companies that conduct

trust, fiduciary and custody activities
6371: Asset management companies

such as health and welfare funds, pension funds and their thirdparty administration as well as other financial vehicles
6722: Companies that are openend

investment funds
6726: Companies that are other

financial vehicles
6732: Companies that are grantmaking

foundations
6733: Asset management companies

that deal with trusts, estates and agency accounts
Stock exchanges
Primary exchanges long name
Alternext American Stock Exchange (AMEX) Australian Securities Exchange (ASX) Bombay Stock Exchange (BSE) NASDAQ OMX Copenhagen Deutsche Brse NYSE Euronext Hong Kong Exchanges & Clearing Ltd (HKEx) JASDAQ Bursa Malaysia (KLSE) Korea Exchange (KRX) KOSDAQ London Stock Exchange Main Market (LSE) London Alternative Investment Market (AIM) Bolsa de Madrid Borsa Italiana Tokyo Market of the HighGrowth and Emerging Stocks (MOTHERS)
Primary exchanges short name used

Alternext AMEX Australian Bombay Copenhagen Deutsche Brse Euronext Hong Kong JASDAQ Kuala Lumpur Korea KOSDAQ London Main Market London AIM Madrid Milan MOTHERS
Primary exchanges long name

NASDAQ National Stock Exchange (NSE) New York Stock Exchange (NYSE) Nigerian Stock Exchange Qatar Exchange (QE) So Paulo Stock Exchange (BM&FBovespa) Saudi Stock Exchange (Tadawul) Shanghai Stock Exchange (SSE) Shenzhen Stock Exchange ChiNext board Shenzhen Stock Exchange Small & Medium Enterprise Board (SZSE) Singapore Stock Exchange (SGX) Tokyo Stock Exchange (TSE) Toronto Stock Exchange (TSX) Toronto Venture Exchange (TSXV) Warsaw Stock Exchange (WSE) Warsaw NewConnect
Primary exchanges short name used

NASDAQ National New York Nigerian Qatar So Paulo Saudi Shanghai Shenzhen ChiNext Shenzhen SME Singapore Tokyo Toronto Toronto Venture Warsaw Warsaw NewConnect
28
Ernst & Young Strategic Growth Markets Area IPO Leaders

Global
Maria Pinelli +44 20 7980 0960 maria.pinelli@ey.com
Areas
Jacqueline Kelley US Paulo Sergio Dortas Brazil Dr. Martin Steinbach Europe, India and Middle East and Africa Any Antola France Daniel Mair Germany R. Balachander India Azhar Zafar Middle East Aaron Johnson Russia and CIS David Vaughan UK Terence Ho Far East and China Don Brumley Australia Tomofumi Watanabe Japan Max Loh Southeast Asia +1 949 437 0237 jacqueline.kelley@ey.com +55 11 257 33552 paulosergio.dortas@br.ey.com +49 6196 996 11574 martin.steinbach@de.ey.com +33 1 46 93 73 40 any.antola@fr.ey.com +49 619 6996 24703 daniel.mair@de.ey.com +91 124 464 4080 balachander.r@in.ey.com +97 143 129 106 azhar.zafar@ae.ey.com +7 495 228 3697 aaron.johnson@ru.ey.com +44 20 7951 3107 dvaughan@uk.ey.com +86 10 5815 2868 terence.ho@cn.ey.com +61 3 9288 8340 don.brumley@au.ey.com +81 3 3503 1100 watanabetmfm@shinnihon.or.jp +65 6309 8828 max.loh@sg.ey.com
If you have any questions or feedback about this report, please contact:
Maria Pinelli Global Vice Chair Strategic Growth Markets Eva Chan Senior Analyst Strategic Growth Markets +44 20 7980 0960 maria.pinelli@ey.com +44 20 7980 0254 eva.chan@uk.ey.com
29
Ernst & Young Assurance | Tax | Transactions | Advisory

About Ernst & Young Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 152,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential. Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit www.ey.com. About Ernst & Youngs IPO Offering Ernst & Young thrives on helping companies to deliver successful initial public offerings (IPOs). Our strategic growth markets professionals, who are dedicated to serving future market leaders worldwide, help businesses like yours evaluate the pros and cons of an IPO. We demystify the process, examine the alternatives and help prepare you for life in the public spotlight. Our Global IPO Center of Excellence is a virtual hub which provides access to our IPO knowledge, tools, thought leadership and contacts from around the world in one easytouse source. www.ey.com/ipocenter 2012 EYGM Limited. All Rights Reserved. EYG no. CY0291 ED None
In line with Ernst & Youngs commitment to minimize its impact on the environment, this document has been printed on paper with a high recycled content. This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Neither EYGM Limited nor any other member of the global Ernst & Young organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, reference should be made to the appropriate advisor.
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Prepare early, move fast

Perspectives on global IPO markets

ii Global IPO trends report 2010

Global IPO markets

Middle East and Africa