Globalization Global IPO Trends Report 2007Highlights: Globalization Global IPO Trends Report 2007 Highlights


Globalization Broadens Markets Horizons: Globalization Broadens Markets Horizons Propelled by mega deals from China and Russia, global IPO markets soared in 2006, and remain buoyant in 2007. Bullish equity markets fueled worldwide IPO activity in 2006 with the greatest amount of capital raised, a record US$246 billion raised through 1,729 deals. In 2007, a rich variety of high quality companies surge through world IPO pipelines with last year’s momentum, albeit with smaller deal sizes. Growth-hungry investors hunt for higher returns abroad, especially in emerging markets. The rapid growth in emerging market economies has resulted in a migration of capital from the developed economies into the emerging markets and the availability of capital around the globe.


Globalization Broadens Markets Horizons: Globalization Broadens Markets Horizons As local stock markets grow more liquid and well-regulated (and in keeping with the historical norm), 90% of the world’s companies list on domestic exchanges. Prelisted companies prefer to stay local since customer base is usually local and local investors best understand business; it’s where infrastructure, investors and liquidity can most easily be found, and where investor relations, market expectations and regulatory framework are most familiar. Reflecting the rise of more world-class financial centers, Hong Kong and London lure the top global IPOs (all of them were domestic IPOs except for two on the LSE). For the first time ever, HKSE led with 19% of total value (US$46.1 billion of global capital raised), bolstered by Chinese mega deals, LSE with 13.5%, thanks to high numbers of cross-border issuers, and NYSE with 10%, the perennial leader until this year. Global bourse rivalry leads to transatlantic NYSE Euronext merger, with more exchange alliances expected soon. NYSE Euronext consists of 4000 listed companies with a total market capitalization of US$28.5 trillion. However, since the exchange is not yet a single regulated platform, the US-registered companies are regulated by the SEC and those listed in Europe are regulated by the European markets and by the FSA.


Globalization Broadens Markets Horizons: Globalization Broadens Markets Horizons A wide array of capital-raising options exist including private equity, Rule 144A and M&A. Under Rule 144A, stocks of foreign issuers can be sold only to US “qualified institutional buyers”, but are exempt from SEC registration, thereby providing quicker, cheaper access to the US capital markets. As global M&A volumes rose to their highest peaks ever at US 3.8 trillion, a trade sale through M&A is also seen as an appealing alternative to a traditional IPO, especially if there’s buyer willing to pay a premium. Private equity’s impact on world IPO markets mounts as LBOs swell in size. For companies that consider themselves undervalued by public markets, not operationally ready to go public, and not willing to take on the regulatory and reporting requirements required of a public company, acquisition by a private equity is considered an attractive alternative to an IPO. Private equity firms are churning their companies at ever-greater speeds; buying private entities, or taking private public entities; adding shareholder value, then putting them back into the public markets. The bigger the company that private equity buys, the more likely it is that the exit will be IPO. Thus, experts predict many more IPOs, as public companies taken out by private equity become larger.


Global Capital Markets: Global Capital Markets


IPO Activity – Number of Deals and Capital Raised: IPO Activity – Number of Deals and Capital Raised 2006 is a Record Year in Capital Raised Source: Dealogic, Thomson Financial


2006 IPO Activity – By Capital Raised and Primary Regions: 16% 42% 37% North America USA 14% ($34.1b) Canada 2% ($4.4b) EMEA 7% ($18.0b) 7% ($17.2b) 5% ($13.0b) 3.4% ($8.3b) 2.5% ($6.1b) 1.7% ($4.2b) Saudi Arabia 1.6% ($4.0b) 1.6% ($3.8b) Switzerland 1.2% ($2.9b) 1.1% ($2.8b) Asia/Pacific South Korea 5% ($12.8b) Japan 3% ($7.2b) India 2% ($5.1b) Australia 2% ($4.2b) Thailand 0.9% ($2.1b) Singapore 0.3% ($0.7b) Philippines 0.2% ($0.6b) 5% Central/South America and the Caribbean Brazil 3.2% ($7.8b) Mexico 0.7% ($1.6b) Taiwan 0.2% ($0.5b) Russian Fed UK France Germany Italy Netherlands Spain Austria China/ Hong Kong 23% ($56.6b) Indonesia 0.2% ($0.5b) China Leads by Total Capital Raised, Followed by US, Russia and UK 2006 IPO Activity – By Capital Raised and Primary Regions Source: Dealogic, Thomson Financial


2006 IPO Activity – By Region and Number of Deals: 17% 36% 45% North America USA 11% (187) Canada 6% (105) EMEA 9% (151) 4% (75) 4% (63) 2% (37) 2% (33) 1.5% (25) 1.3% (23) 1.2% (21) 1.1% (19) 1% (17) 2% Central/South America and the Caribbean Brazil 1.6% (28) Mexico 0.2% (3) Italy Belgium UK France Germany Israel Poland Denmark Russian Fed Sweden Asia/Pacific China/Hong Kong Australia India South Korea Malaysia Thailand Singapore Indonesia Japan 10% (175) 10% (173) 4.5% (78) 4% (65) 2% (33) 1% (19) 1% (15) 1% (15) 11% (185) US Leads by Number of Deals, Followed by Japan and China 2006 IPO Activity – By Region and Number of Deals Source: Dealogic, Thomson Financial


IPO Activity – Distribution of IPOs by World Region: IPO Activity – Distribution of IPOs by World Region Source: Dealogic, Thomson Financial By Number of IPOs EMEA leads, followed by Asia and North America


IPO Activity – Distribution of IPOs by World Region: IPO Activity – Distribution of IPOs by World Region By Total Capital Raised, EMEA and Asia Leads Due to Large Deals Source: Dealogic, Thomson Financial


2006 IPO Activity – By Stock Exchanges*: 2006 IPO Activity – By Stock Exchanges* Source: Dealogic,Thomson Financial * This is the only slide that the data is by the exchanges’ domicile regardless of the listed company domicile


Top 20 Largest IPOs : Top 20 Largest IPOs In 2006, the Top 20 IPOs raised about US$84 billion, representing 35% of the total capital raised by IPOs. Membership in the Top 20 IPOs Club required a minimum of US$1.6 billion in capital raised. In keeping with the historical norm of companies listing at home, all 20 went public on domestic exchanges, except for 2 cross-border IPOs on the LSE from Russia and Kazakhstan. Among the Top 20, the dominant industries were energy/power/oil and financial services.


The Top 20 IPOs - 2006: The Top 20 IPOs - 2006 by Industry by Region by Exchange


IPO Activity – The Top 20 IPOs by Capital Raised: IPO Activity – The Top 20 IPOs by Capital Raised 9 of the Top 20 IPOs Came from Emerging Markets Source: Dealogic, Thomson Financial Note: For theTop 20 IPOs, we have excluded KKR Private Equity Investors LP, Apollo Alternative Assets LP and MW Tops Ltd as they are not operating companies.


IPO Activity – The Top 20 IPOs by Capital Raised: IPO Activity – The Top 20 IPOs by Capital Raised Source: Dealogic, Thomson Financial


Slide16: BRICs IPO Activity by Year Source: Dealogic,Thomson Financial, Ernst & Young Note: By Company Domicile 2006: The Year of the Emerging Markets BRICs have seen significant growth in IPO activity in the last five years


World In Focus: World In Focus


Greater China: Hong Kong and Shanghai Host the World’s Largest IPO Ever: Greater China: Hong Kong and Shanghai Host the World’s Largest IPO Ever Greater China’s IPO markets soared to an all-time high, with several mega–IPOs in 2006, and more large IPOs in 2007. Raising US$56.6 billion in 1754 offerings, HKSE hosted the world’s largest IPO ever, the ICBC, with US$21.9 billion raised and the second largest offering of 2006, Bank of China, which raised US$11 billion. Both IPOs dual-listed on HKSE and Shanghai. HKSE led world exchanges in fundraising in 2006, and showcased its world-class financial player status, liquidity and corporate governance standards. As global capital and resources migrate to Greater China, foreign investors grow more comfortable investing locally, especially in state-owned enterprises and major companies. A dual listing trend and budding rivalry emerges for Hong Kong and Shanghai stock exchanges. HKSE has become the preferred fundraising platform for large mainland Chinese companies. While the Hong Kong exchange (H-shares) targets sophisticated international investors, the Shanghai Exchange (A-shares) caters primarily to PRC nationals. Many large Chinese companies offer shares to US institutional investors under Rule 144A.


India: Indian Exchanges Host Billion-Dollar IPOs: India: Indian Exchanges Host Billion-Dollar IPOs The strength of India’s economy, stock market, corporate profits, energy sector, and private equity fuel IPOs in 2006 and 2007. In 2006, India’s IPO market raised US$7.23 billion, through 78 IPOs. IPO activity has has been fairly broad-based, although energy companies dominated with more than 50% share of funds raised. India’s greater number of larger deals has been driven by the growth of Indian corporations and their need for additional capital for potential acquisitions. The localization trend in India is evidenced by several billion-dollar IPOs in 2006. In 2006, India’s largest IPO, Reliance Petroleum raised US$1.8 billion, followed by the oil production and exploration company, Cairn Energy, which raised US$1.3 billion –- both companies listed on domestic exchanges only.


India: Indian Exchanges Host Billion-Dollar IPOs: India: Indian Exchanges Host Billion-Dollar IPOs Cross-border activity and the role of foreign capital continues to grow. Foreign institutional investors make up three-fourths of new funds flowing into the market. Growing numbers of Indian companies are listing abroad, especially London, Singapore and Luxembourg, primarily for higher valuations and visibility. Enabling relatively easy access to global institutional capital, Qualified Institutional Placements (QIPs) have enjoyed immediate popularity. According to analysts, QIPs are more efficient, cost- and time-effective, investor- and issuer-friendly. The private equity rush into India has lead to a potential for many IPO exits. In 2006, private equity firms invested more than $7 billion in India. Top global private equity funds such as Carlyle, Blackstone, Texas Pacific and Warburg Pincus, as well as local funds, have been key drivers of the strength of Indian IPO markets.


Europe: Russian Growth Story Drives European Markets: Europe: Russian Growth Story Drives European Markets Europe’s IPO markets rose to an all-time high in 2006, and has remained buoyant in 2007, bolstered by beefy deals, cross-border listings in London and private equity. As a region, Europe attained the largest dollar value worldwide, US$93.9 billion, via 528 deals. Hefty transactions characterized the European IPO market in 2006 with its average deal size of US$177.8 million. The largest European listing (globally, the third largest) was Russian state-owned oil company Rosneft, that raised US$10.7 billion in a dual listing in London and Moscow, while the next largest was France’s investment bank Natixis, raised US$5.3 billion on Euronext . London has become one of the top listings destination for cross-border issuers seeking relatively quick and easy capital. London’s chief selling points: deep liquidity, a wide range of institutional investors, simple listing requirements, broad analyst coverage, cheaper underwriting fees than the US, superior valuations, a reputation for openness to international companies, unparalleled access to international capital, and geographical proximity.


Europe: Russian Growth Story Drives European Markets: Europe: Russian Growth Story Drives European Markets Europe’s junior exchanges, including London’s AIM, the Euronext’s Alternext, and Deutsche Borse’s Entry Standard, are flourishing with small-cap activity. Driving UK IPO activity is London’s small-cap exchange, Alternative Investment Market (AIM); the world’s leading exchange in terms of numbers of deals, with 11% of the total number of IPOs in 2006. However AIM represents just 34% of European deal numbers and 8% of total European funds raised. The ballooning growth in European private equity is leading to more IPO exits, and sizeable public-to-private transactions. In 2006, the European private equity markets had a strong year, with deal volume up 41% from 2005, and 15.6 billion euros worth of deals -- with many exits via the public markets. The biggest private equity backed IPO of Europe of the year was oil refiner Petroplus Holdings offering, which raised $2.3 billion in Zurich.


Middle East: Demand for Middle East IPOs Far Exceeds Supply: Middle East: Demand for Middle East IPOs Far Exceeds Supply After three years of record growth, most Middle East markets endured erratic performance in 2006, but seem to be steadier in 2007. Most Middle East exchanges were down for the year, except for Oman, Bahrain, Kuwait and Egypt. The Saudi exchange lost more than half its value. Dubai’s exchange was the world’s worst performing stock market in 2006, as it plummeted by two-thirds since its peak in the previous year. Nevertheless, Middle East market instability has not strictly dampened investor appetite for IPOs. In 2006, Middle markets raised US$10.8 billion through 87 deals. In 2006, the Middle East’s top IPO was Qatar’s Al Rayyan Bank offering, which raised US$1.1 billion. A strong Middle East IPO outlook for the next 12-24 months includes large-scale privatizations and infrastructural projects Factors behind Middle East volatility include: excess liquidity, irrational retail speculation, market immaturity, and lack of transparency. Although highly liquid, Middle East markets offer a limited number of investment opportunities. Currently, only about 1,600 companies are listed on all 14 Arab bourses.


CIS/Russia: “The Year of IPOs in Russia”: CIS/Russia: “The Year of IPOs in Russia” Russian IPO markets flourish in 2006 and 2007, particularly in the commodities and financial services sectors. In 2006, Russian-domiciled companies raised US$18 billion through 21 deals. In the first half of 2007, large IPOs worth over US$500 million continue to dual list in Moscow and London – most notably, Russia’s giant state-owned bank VTB with a deal size of about US$8 billion. Larger Russian companies seek credibility and deeper liquidity by listing in London Since every Russian company is required to list 30% of its offering on the domestic Russian exchanges, the big question is whether they list abroad as well. Any company with more than US$5 billion in market capitalization needs more market capacity than Moscow can provide, so larger companies will dual list: locally in Moscow coupled with a cross-border listing. If so, the preferred market has been London – through a Global Depository Receipt (GDR) listing. Of the 21 Russian-domiciled IPOs in 2006, seven were listed only in Moscow, while the other 14 were listed on the LSE (eight deals), AIM (five deals) and NASDAQ (one deal).


CIS/Russia: “The Year of IPOs in Russia”: CIS/Russia: “The Year of IPOs in Russia” Russian companies face uncertainty ahead with 2008 presidential elections, commodity prices and corporate governance issues. Russians elect a new parliament in December 2007, and choose a successor to President Putin in March 2008. Another major risk factor is the possibility of a sharp correction in the price of oil. Recent research indicates that Russian companies are leaving as much as 20% of their valuations on the table because of shaky corporate governance standards. A GDR in London combined with a Rule 144A offering in the US is the most popular form of listing. A GDR is a dollar-denominated certificate of ownership of underlying shares which trades on an international exchange, typically London. As the private equity market remains undeveloped, IPOs are by far the most popular Russian exit strategy, with the best valuations. As the largest central Asian economy, mineral-rich Kazakhstan launches large IPOs in resources and banking sectors. In 2006, a Kazakh upstream national oil and gas company, KazMunaiGaz, raised $2.03 billion in the largest ever Kazakh IPO. In general, all Kazakh IPOs have priced very successfully.


Australia: High Commodities Prices Fuel Australian Resources Boom: Australia: High Commodities Prices Fuel Australian Resources Boom Rising commodity prices and demand from Asia fuel thriving resources and energy sectors. In 2006, Australia launched 173 IPOs, raising US$4.2 billion, with many listings in the resources and energy sector. The largest Australian IPO of 2006 was explosives maker Dyno Nobel ($800 million). A recent surge in private equity will lead to many IPO exits in next 12-24 months. The Australian IPO market seems even stronger in 2007. The recent surge in private equity will lead to many IPO exits expected in the next 12–24 months.


United States: Private Equity and Venture Capital Backs Over Half of All IPOs: United States: Private Equity and Venture Capital Backs Over Half of All IPOs Robust US markets garner the highest number of IPOs in 2006, and maintain strength with a pipeline of high-quality deals in 2007. In 2006, the US launched the 187 deals, the highest number of IPOs and raised $34.2 billion, the second largest amount of capital raised. The largest US IPO in 2006 was MasterCard raising $2.6 billion. In 2007, although there’s a backlog of deals filed with the SEC, it’s not the “irrational IPO exuberance” of the internet bubble years. Most global companies list at home as local markets grow more liquid and better-regulated. Globalization of capital has enhanced regional economic growth, cross-border trading, liquidity, and the stringency of local regulatory frameworks – all of which heightens the ability of local exchanges to support large IPOs. Furthermore, in 2006, when nine out of ten companies went public in their home market, they were merely following a time-honored tradition of listing on their domestic exchanges. A full US listing is still the benchmark standard with the deepest liquidity, premium valuations and many strategic advantages.


United States: Private Equity and Venture Capital Backs Over Half of All IPOs: United States: Private Equity and Venture Capital Backs Over Half of All IPOs Many alternative financing options exist in the US including private equity, M&A, Rule 144A offerings, and SPACS. Private equity and venture capital firms back over half of US IPOs. For US and foreign companies who seek speedier and easier access to the US capital markets, 144A private placement transactions have emerged as an increasingly popular alternative to a full US listing. These days, many US companies see M&A as an appealing alternative to a traditional IPO. Private equity and venture capital back over half of IPOs 30% of all US-domiciled IPOs were venture-backed, underscoring the key role of the US venture capital industry in sourcing companies seeking to go public. In 2006, 34% of IPO proceeds and 27% of IPOs were private equity backed buy-outs. Private equity-backed companies look to the US IPO markets as major sources of liquidity and capital growth. Since private equity firms have been such avid asset purchasers, they will also be big sponsors for IPOs in the future.


Q1’07 Global IPO Landscape: Q1’07 Global IPO Landscape


IPO Activity – Global IPO Activity by Quarter: IPO Activity – Global IPO Activity by Quarter Q1’07 had more IPOs and Capital Raised than Q1’06 Source: Dealogic, Thomson Financial


IPO Activity – Distribution of IPOs by World Region: IPO Activity – Distribution of IPOs by World Region Source: Dealogic, Thomson Financial By Number of IPOs Asia Pacific leads, followed by Europe and North America


IPO Activity – Distribution of IPOs by World Region: IPO Activity – Distribution of IPOs by World Region By Total Capital Raised, Europe and Asia Leads Due to Large Deals Source: Dealogic, Thomson Financial


2006 IPO Activity – By Stock Exchanges*: 2006 IPO Activity – By Stock Exchanges* Source: Dealogic,Thomson Financial * This is the only slide that the data is by the exchanges’ domicile regardless of the listed company domicile


2007 Q1 IPO Activity – The Top 20 IPOs by Capital Raised: 2007 Q1 IPO Activity – The Top 20 IPOs by Capital Raised Europe accounts for half of the Top 10 Deals Source: Dealogic, Thomson Financial


2007 Q1 IPO Activity – The Top 20 IPOs by Capital Raised: 2007 Q1 IPO Activity – The Top 20 IPOs by Capital Raised Europe accounts for 35% of Top 20 Deals and US accounts for 30% Source: Dealogic, Thomson Financial


Q1’02 – Q1’07 Quarterly Landscape by Primary Countries: Q1’02 – Q1’07 Quarterly Landscape by Primary Countries


United States IPO Activity by Quarter: United States IPO Activity by Quarter Source: Dealogic, Thomson Financial


United Kingdom IPO Activity by Quarter: United Kingdom IPO Activity by Quarter Source: Dealogic, Thomson Financial


France IPO Activity by Quarter: France IPO Activity by Quarter Source: Dealogic, Thomson Financial


Germany IPO Activity by Quarter: Germany IPO Activity by Quarter Source: Dealogic, Thomson Financial


Greater China (including HK) IPO Activity by Quarter: Greater China (including HK) IPO Activity by Quarter Large Deals lead to significant increases in capital raised in Q406 Source: Dealogic, Thomson Financial


China (Mainland only) IPO Activity by Quarter: China (Mainland only) IPO Activity by Quarter Source: Dealogic, Thomson Financial


India IPO Activity by Quarter: India IPO Activity by Quarter Source: Dealogic, Thomson Financial


Russia IPO Activity by Quarter: Russia IPO Activity by Quarter Large Deals lead to significant increases in capital raised in Q306 Source: Dealogic, Thomson Financial


Brazil IPO Activity by Quarter: Brazil IPO Activity by Quarter Source: Dealogic, Thomson Financial


Appendix: Definitions: Appendix: Definitions IPO Definition: As we focus on IPOs of operating companies, we define an IPO as: An IPO is a company's first offering of equity to the public. Comment: Only those IPOs for which Dealogic, Thomson Financial and Ernst & Young hold data regarding the issue date (the day the offer is priced and allocations are subsequently made), trading date (the date on which the security first trades) and proceeds (funds raised including any over allottment sold) are included. Postponed IPOs or those which have not yet priced are therefore excluded. In an attempt to exclude non operating company IPOs such as trusts or funds, we exclude companies with the following SIC codes and these companies are removed from the database: 6091: Financial companies that conduct Trust, Fiduciary and Custody activities. 6371: Asset management companies such as Health and Welfare funds, Pension Funds and their third party adminstration as well as other financial vehicles. 6722: Companies that are open-end investment funds. 6726: Companies that are other financial vehicles. 6732: Companies that are grant-making foundations. 6733: Asset management companies that deal with trusts, estates and agency accounts. 6798: Companies that are REITs