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IPOs as a Key Exit Strategy in Asian Private Equity-Backed Companies – September 2014

by Ciantelle Lawrence

  • 10 Sep 2014
  • PE

Preqin’s Buyout Deals Analyst shows that divestments of private equity-backed portfolio companies based in Asia through initial public offerings (IPOs) and follow-ons (secondary stock offerings) accounted for 53% of all private equity-backed exits within the region in 2014 YTD in terms of number of exits. This has increased by 24 percentage points since 2013 and represents the highest proportion that the IPOs and follow-ons have accounted for since 2010. However, at $8.9bn, the aggregate value of IPOs and secondary stock offerings of Asia­­­-based portfolio companies accounted for 36% of the total value of exits in 2014 YTD, 14 percentage points lower than in 2013. 

Preqin’s data demonstrates that the proportion that IPOs and follow-ons account for peaked at 61% of the total number of Asia-based portfolio companies’ exits in 2010, but hit lows of 38% and 39% in 2008 and 2013 respectively. Despite the wide fluctuations in the proportion of the number of exits that IPOs and follow-ons have represented since 2006, this exit strategy remains key for investors in the region. Across the period 2006-2014 YTD, IPOs and follow-ons accounted for a significant 48% of the number and 52% of the aggregate value of all exits of private equity-backed portfolio companies based in Asia. 

Further analysis reveals that the food and agriculture industry, at 27%, accounted for the highest proportion of the aggregate value of all IPOs and follow-ons of private equity-backed Asia-based companies in 2014 YTD. This is largely due to the IPO of WH Group, a Chinese meat producer backed by an investor consortium including CDH Investments and Goldman Sachs Merchant Banking Division. It completed its offering in July 2014, raising approximately $2bn via the public markets. The information technology sector has been the most prominent with regards to the number of IPOs and follow-ons of Asian companies so far this year, and accounted for 19% of such exits in 2014 YTD.

The prominence of IPOs as an exit strategy for private equity-backed Asia-based companies is evident and this is likely to be further strengthened by the imminent listing of Alibaba Group. The China-based e-commerce company recently set out the terms for its IPO and is expected to raise approximately $20bn.

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