AI Magazine Issue 3 2017

4 Acquisition International - March 2017 News: from around the world IPOMarket Still Delivering 12% Returns Despite Volatility Ahead According to the March 2017 Deloitte IPO Report ‘A game of snakes and ladders’, IPO offerings have been delivering returns of nearly 12% on a weighted basis to the end of December 2016, outperforming the All Ords which closed up 7% for the year. However, in comparison with prior years, Deloitte notes that performance was relatively subdued amidst increasing volatility. The report reveals that IPO volumes remained strong last year, with 94 listings finishing just shy of 2015 volumes of 97. Of these 94 IPO listings during 2016 (with a total market capitalisation of $14.5bn and $7.9bn of capital raised), 38 exceeded $75m in market capitalisation, accounting for 89% of all new capital raised. “Looking forward to the rest of 2017, Deloitte expects the Australian IPO market to remain active, although deals are likely once again, to be weighted towards the smaller end of the market,” said Ian Turner, Deloitte National Leader of Corporate Finance. “Our conversations across the market highlight that investors are increasingly discerning and are expecting to see a demonstrated track record and growth profile beyond just the prospectus forecast period. “We expect a number of mature companies that delayed listing in 2016 to go public as market conditions improve and greater political certainty emerges,” he said. “Already in these first fewmonths of 2017, we have seen a number of large listed corporates including Origin Energy, Wesfarmers and Fairfax considering spinning-off established, successful business units into separate publicly listed vehicles. “Although PE activity has been subdued in 2016 following the significant exits over the last few years, there is a reasonable pipeline of assets that are likely to be IPO candidates over the next 12-24 months reflecting the quality of the business and growth opportunities,” he said. “In the small to mid-cap space, we expect pre- IPO capital raisings to be an increasingly common means of securing capital to expand business scale, invest in new equipment or technologies and improve balance sheet strength prior to listing.” IPO offerings have remained robust in the second half of 2016, however market sentiment towards 2017 IPOs remains modest. Investment market advised to monitor China volatility The Deloitte report shows that 2017 M&A activity is likely to be driven by large corporates who are increasingly taking a ‘back to basics’ approach as evidenced in recent and upcoming demergers. “Generally, the investment market should be buoyed by the positive picture of global growth in 2017,” said Mr Turner. “However, the investment market should also keep in an eye on the current volatility emanating from China, US Federal Reserve tightening, and in Europe.” Deloitte does not expect Donald Trump’s presidency and fiscal policy to influence Australia’s economy significantly, despite some rattling of the markets if the new US President is successful in imposing a punitive tariff on Chinese imports.