Bankers see Europe’s IPO rebound broadening in 2025 despite the threat of trade frictions and political upheaval, as private equity firms look to unload portfolios and secure returns.
European bourses have seen more than US$19 billion ($25.48 billion) raised through initial public offerings this year — a jump of more than 30% from 2023’s volume. But that still lags historical averages, including the pandemic-era peak and the decade preceding it.
Dealmakers are optimistic that the upward trend will continue, with listings expected in early 2025 — such as HBX Group in Spain and Stada Arzneimittel in Germany — paving the way for others later in the year and into 2026.
“There’s undeniably a tricky macroeconomic picture to navigate for IPOs next year, but the need for sellers, and in particular private equity sellers, to be recycling capital back to limited partners will likely trump everything else,” said Lawrence Jamieson, co-head of ECM for Europe, the Middle East and Africa at Barclays.
Buyout and venture capital groups are sitting on trillions of dollars of unrealised investments. The sudden rise in borrowing costs that followed the Covid-19 pandemic sent valuations tumbling and left investors that had bought into IPOs of the cheap-money era nursing painful losses.
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Now, those groups are warming up to the idea of IPOs to unlock cash when interest rates are coming back down and stocks are hitting record highs.
“The reason we haven’t seen more IPOs this year is that both sides of the table, issuers and investors, have been a bit reluctant,” said Richard Cormack, head of ECM EMEA at Goldman Sachs Group. “I think that’s starting to thaw, and there’s a coming together across all those different points including the bid-ask spread.”
Several IPO candidates this year opted to push deals into 2025, citing uncertainty ahead of the US election. Risks to next year’s outlook include US President-elect Donald Trump’s threat to impose tariffs on goods from outside the US. Such measures could dent European stocks at a time of political upheaval in France and Germany, the region’s biggest economies.
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On the flip-side, advisers hope the wide valuation gap between US and European stocks will entice investors, while Trump’s potentially inflationary policies could create a scenario where interest rates fall more quickly in Europe.
“You have to look through those geopolitical risks,” said Andrew Robinson, who heads up HSBC Holdings’ ECM business in EMEA and its global ECM syndicate. While investors will continue to be selective, “they are open to looking at the right IPOs”, he said.
Private equity deals
This year’s most successful offerings were tied to private equity, including Swiss skincare giant Galderma Group, French software firm Planisware and even buyout house CVC Capital Partners itself. The deals came at attractive discounts and rose in the after-market, enabling shareholders to trim positions.
“This year demonstrated that the IPO market is functioning and that listings and follow-ons are a valuable monetisation route for sponsors,” said Valery Barrier, head of EMEA ECM at Citigroup.
That’s not to say all deals are equal. Shares in CVC-backed Polish convenience store Zabka Group and German perfume retailer Douglas are trading below their issue price despite their IPOs having been among the region’s largest this year.
Other candidates such as Spanish bakery firm Europastry and Italian sneaker maker Golden Goose postponed their listing ambitions.
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Besides private equity-backed businesses, European firms under pressure to streamline their operations and unlock value for shareholders are expected to be a source of listings in 2025. Germany’s Continental is pressing on with plans to spin off its car parts business, while Sweden’s Embracer Group is planning to spin off its unit Asmodee Group.
“Corporate carve-outs are still very much in play, we still live in an activists’ world, and I would expect that dynamic to continue to be pretty active on both sides of the Atlantic,” said James Palmer, head of ECM EMEA at Bank of America.
Europe’s IPO market has been dominated by larger deals, with about 70% of the value raised this year coming from offerings over US$500 million apiece, data compiled by Bloomberg show. Advisers are confident the gates will open to more mid-sized companies.
“It’s still not an ‘anything goes’ kind of market, but the top quartile of IPOs has done very well, and I would expect the market to progressively open up to a broader set of companies,” Martin Thorneycroft, global co-head of ECM at Morgan Stanley, said.
Charts: Bloomberg
