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Bankers Expect Europe’s IPO Market to Defy Dangers in 2025
(Bloomberg) -- 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 $19 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 AG 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 Plc.
Buyout and venture capital groups are sitting on trillions of dollars of unrealized 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.
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 Inc. “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.
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 Plc’s 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.
Equity indexes are trading around all-time highs despite the uncertainty, and there’s a “fair chance” stocks will climb further if rates continue edging down, according to Andreas Bernstorff, head of ECM at BNP Paribas SA. “We think 2025 will bring many elements that could combine to create a great window for new issuance,” he said in emailed comments.
Private Equity Deals
This year’s most successful offerings were tied to private equity, including Swiss skincare giant Galderma Group AG, French software firm Planisware SA and even buyout house CVC Capital Partners Plc 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 monetization route for sponsors,” said Valery Barrier, head of EMEA ECM at Citigroup Inc.
That’s not to say all deals are equal. Shares in CVC-backed Polish convenience store Zabka Group SA and German perfume retailer Douglas AG 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 SA and Italian sneaker maker Golden Goose SpA postponed their listing ambitions.
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 AG is pressing on with plans to spin off its car parts business, while Sweden’s Embracer Group AB is planning to spin off its unit Asmodee Group AB.
“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 Corp.
Europe’s IPO market has been dominated by larger deals, with about 70% of the value raised this year coming from offerings over $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.
(Updates with comments from BNP Paribas in the 11th paragraph)