Another rocky road ahead

DESPITE a “glimmer of hope” in the December quarter, Minter Ellison says further momentum will be required to spark a full revival of the IPO market.
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Kristie Batten

Many IPOs failed to even get over the line last year, with many vying to list this year as conditions improve.

Citing numbers from Thomson Reuters, Minter Ellison said proceeds from 614 Australian equity and equity-related deals in 2012 were $A19.8 billion, 17.9% down on 2011.

Minter Ellison said the success of two large IPOs – Shopping Centres Australia and Fonterra – was a cause for optimism, but the future depended on how the next few floats fared.

“If high-quality, well-prepared issuers with sound business cases, forecasts and governance frameworks come to market, they may be able to take advantage of demand from fund managers looking for new stocks to diversify into,” Minter Ellison partner, capital markets, Daniel Scotti said.

Private equity activity was also lower in 2012.

Mergers and acquisitions were down slightly, but up 36% in the December quarter compared with the previous three-month period.

Minter Ellison said confidence would be the key in 2013.

“Access to funding for M&A purposes will not be what stops deals being done in 2013,” Minter Ellison Sydney M&A head James Philips said.

“Lack of confidence is what will need to be overcome, so that companies are willing to take on more debt or raise new capital for spending on acquisitions.

“As the current uncertainty continues into 2013, businesses may come to accept that their balance sheets are strong and they cannot stand still waiting for macro conditions to change while value-creating M&A opportunities are available.”

Minter Ellison has predicted another volatile year for markets in 2013.

It acknowledged that 2012 was a tough year for the mining sector, as shareholders pressured companies to focus on capital discipline and cost-cutting amid falling commodity prices, but expected a gradual rebound this year.

This article first appeared in ILN's sister publication