Capital markets activity in Germany is likely to surge in 2011 as economic sentiment remains stable, private equity investors seek exits and shares are seen as a good alternative to low-yielding bonds, Commerzbank said.
"The money is there. If it goes well and we do not see further external shocks we could see 1-2 further small initial public offerings in Germany this year and 15-20 in 2011," Ute Gerbaulet, head of the Equity Capital Markets division of Germany's second biggest lender Commerzbank said.
"Half of these could be exits of private equity investors, who have had a hard time selling their investments during the last two years but have to exit now as financial sponsors return funds to investors", Gerbaulet told Reuters in an interview.
"We are likely to see a volume again at a range of 15-20 billion euros in cap hikes in Germany in 2011," she said, adding that the focus now had shifted from restructuring cases back to growth-focused transactions.
Investors have shown a willingness to buy new shares of established companies, like Volkswagen or more recently Deutsche Bank and Heidelberger Druck. However, the "psychological threshold" for investors to invest in companies that did not yet have a listing often remained high, she said.
"As the euro crisis rattled markets in spring, many companies put off any considerations of an IPO but they might soon be picked up again," Gerbaulet said.
This year there have been seven IPOs with a total volume of only 2.3 billion euros ($3.21 billion) in Germany, where companies tend to rely more on their local banks for refinancing rather than capital markets. By comparison, a total of 888 IPOs were launched globally in the nine months to September 30, 311 more than in all of 2009, according to an Ernst & Young study.
Asia is powering ahead, with groups like AIA, the Asian life insurance arm of AIG, selling $17.9 billion of shares in its Hong Kong IPO. "Unless we see new external shocks, capital markets are likely to stay favourable for the next 18 months", Gerbaulet said.
Commerzbank, which after Deutsche Bank is Germany's second biggest bookrunner in terms of the number of transactions, expects to continue to make money in the business and defend its No. 2 position in equity capital markets. "We are currently working on several IPO mandates in Germany for 2011 - including financial sponsor portfolio companies as well as family held companies, which seek to take up money to finance expansion," Gerbaulet said.
"Commerzbank is also looking into the IPO plans of a large UK-based company for 2011," she added. Gerbaulet declined to identify the candidates but said Commerzbank's role in financing medium-sized German companies meant it was not seen as just a "one-shot" partner for capital transactions. "Our long-term relationships with German Mittelstand companies puts us in a good position to win capital markets related business," she said.
Market observers say cable operator Kabel Baden-Wuerttemberg, which is owned by investor EQT, and shipping group Hapag-Lloyd could be among the next big flotations in Germany.
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