Why are European PE Deals Happening Faster in 2013?


December 15, 2013

The Wall Street Journal (WSJ) has reported that private stakes are being sold quicker in Europe than at any time since 2007, before the world was afflicted by the global financial crisis. Accelerated bookbuild deals, as they are known, can be fully completed in days, and such deals have breached the $100billion barrier for the first time in six years, although there is still some way to go before 2007s peak of $112billion worth of deals is surpassed.


One of the main reasons cited for the renewed popularity in this type of private equity (PE) deal is that firms and stakeholders believe initial public offerings (IPO’s) will be popular in 2014. These deals take longer to put together, and those who want to cash in on their equity appear keen to do so now rather than have to wait and see what happens in a few months.


If there is a profitable deal placed on the table today, it makes sense to take it and allow someone else to speculate on the success of a future IPO, rather than hang onto a stake where the perceived value is currently uncertain. Goldman Sachs’s François-Xavier de Mallmann told WSJ, “It’s the first great window to sell assets since the financial crisis.”


The more favourable, although far from ideal, market conditions have undoubtedly made deal making easier, but what is also notable is the number of PE firms who have been buying and selling stocks in public companies.


While it is stated that PE activity is increasing now ahead of anticipated IPO’s in 2014, historically the markets have been reliant on a strong PE marketplace in order to drive successful IPO’s. This is because it allows both markets to remain competitive and businesses to be profitable.


In contrast, if PE firms weren’t investing or interested in investing, an IPO would be consequently unlikely to garner sufficient interest. Ultimately, Europe’s accelerating PE marketplace and its hugely inflated value against recent years can be put down to one simple fact. “Fund managers are finally being given capital to allocate,” Jon Ingram of JP Morgan told WSJ.
Indeed, if there’s nothing for fund managers to do, where do the deals come from?

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