Private Markets Are Humming While Europe’s IPOs Linger

Private markets are keeping Europe’s investment bankers busy while they wait for a stronger return of initial public offerings in the region.

(Bloomberg) — Private markets are keeping Europe’s investment bankers busy while they wait for a stronger return of initial public offerings in the region.

Startups have been raising capital from investors privately, albeit at a slower pace, even as sharp swings in equity indexes weigh on appetite for public listings. Leaning toward private markets gives companies flexibility and access to a wider range of capital structures — a stark contrast to the public market, where the price of a security determines everything.

“Private capital markets aren’t just an alternative to public markets,” said Suneel Hargunani, co-head of Europe, Middle East and Africa equity capital markets at Citigroup Inc. “It has become an asset class in its own right,” he said, adding that it’s “unlikely to become less active when the IPO market returns.”

Citigroup has spent years building out its offerings for companies that haven’t yet gone public. Speaking on the sidelines of the bank’s recent EMEA Private Champions Conference in London, Hargunani said fundraising processes are becoming more aligned with how the IPO market functions, in terms of advisory and bank mandates. 

The conference was attended by more than 80 investors, including sovereign wealth funds, family offices and hedge funds, who held meetings with 25 private companies. Among firms attending the conference were French carpooling app BlablaCar, Portuguese lender Novo Banco SA, Turkish rapid delivery startup Getir and Madrid-based workforce marketplace Jobandtalent.

Sentiment ‘Improving’

“Sentiment about IPO markets is gradually improving,” Hargunani said. “We are having a lot more conversations with prospective issuers for 2024 listings, who are assessing their options.” 

While questions remain about investor appetite for major listings, Europe’s IPO market is slowly bouncing back to life after 18 months of inactivity. Schott Pharma AG last week surged in its first day of trading after an €813 million ($851 million) IPO, while military gearbox manufacturer Renk Group, which is backed by private equity firm Triton Partners, and Ardian’s French software company Planisware, are also selling shares in an IPO.

Also among the conference attendees were companies starting to prepare for potential listings. Barcelona-based Stark Future, which makes electric motorbikes, and Sweden’s Exeger, a solar-cell technology firm backed by SoftBank Group, are looking to go public down the line, according to executives attending the conference. 

“We think a company like Stark belongs in public markets,” Anton Wass, chief executive officer and founder, told Bloomberg at the conference. “A 2025 listing could be feasible for us.”

Meanwhile Exeger is working with Citigroup to raise €20 million of equity this fall, to complement potential debt funding, said chief executive officer and founder Giovanni Fili.

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