IPO activity is set to dramatically increase over the next few months, as venture capital companies seek exit routes. Venture capital companies that invested in businesses before the bursting of the technology bubble are expected to take their money and run, as the main market continues to hover just above the 4,000 level.
Several floats are anticipated for the final quarter of this year and the beginning of next year in a long-awaited recovery for IPO activity, which has been at its lowest level for years.
Neil Austin, head of new issues at KPMG corporate finance, said: ‘In volume terms, there is now no equivalent of the tech sector that provided a raft of early stage entrants. Going forward, the pipeline is likely to be driven by private equity exits.’
Ernst & Young said it was working with a number of clients planning IPOs over the next few months who have still not made their plans public.
Several companies have announced their intentions, including Wolfson Microelectronics, Tussauds Group, Xchanging, Strakan and Inpharmatica.
David Wilkinson, head of IPOs at Ernst & Young, said: ‘With the market having raised itself somewhat, it’s galvanised some of the entrepreneurs, who were putting it off until markets looked better, to start thinking quite seriously again. We’re having a number of conversations with our clients who have moved it from the back burner.’
Grant Thornton is predicting much of the new activity to be centred on Aim, which has recently introduced new rules to make it easier for companies to list.
But Gerry Beaney, partner at Grant Thornton, said that much would depend on how equity markets perform over the coming months.
‘(Venture capital companies) will look at the capital markets for an exit, but like everyone else they will have invested at a certain price and a certain time, and will want to get an appropriate valuation.’
Grant Thornton pointed to a 53% rise in new admissions on Aim in the third quarter of 2003. The £388.97m fundraising of Northumberland Water was the biggest ever new admission seen on Aim.
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