Last year saw a significant increase in equity raising across Europe’s equity market in a bid to fuel the continent’s economic recovery from the coronavirus pandemic. Burhan Khadbai reports.

European equity capital raising had an exceptionally strong year in 2021, with issuance totalling €226bn — an increase of 29% from 2020 and 94% from 2019, when there was €176bn and €116bn of supply, respectively, according to the Association for Financial Markets in Europe’s (AFME) 2021 Equity Primary Markets and Trading Report, citing data from Dealogic.

Last year marked the highest annual issuance in the European equity market since 2015, when there was €239bn of supply. The surge in supply was driven by a robust year for initial public offerings (IPOs), with volumes reaching their highest since 2007 at €69bn. Private-equity exits via IPOs represented 35% of the year’s total IPO issuance, with a record high of private equity-backed IPOs.

Special purpose acquisition vehicle (SPAC) IPOs reached €7.4bn in 2021, representing 11% of the total IPO volume in Europe, an increase from 3% in 2020. SPACs are companies formed to raise capital via an IPO with the proceeds used to acquire another business or asset.

In the US, SPAC IPOs represented 50% of total IPOs in 2021, although 60% of these transactions were originated in the first quarter of the year before increased regulatory scrutiny led to a slowdown.

Computers and electronics were by far the biggest sector for IPOs in Europe in 2021, accounting for €21.28bn of total IPO proceeds, followed by finance (€13.18bn), auto and trucks (€4.28bn) and healthcare (€3.98bn).

The London Stock Exchange’s (LSE) main market led Europe’s equity issuance in 2021, proving that the UK is still the biggest hub for the continent’s equity market, despite Brexit. The LSE’s main market accounted for €46.25bn of issuance last year, followed by Frankfurt (€34.75bn), Stockholm (€20.27bn) and Paris (€20.26bn).

Equity issuance on junior exchanges in Europe was also strong in 2021, with €22.7bn raised, compared with €11.3bn in 2020. Last year marked the highest annual total raised on junior exchanges — venues that facilitate equity raising by smaller companies as they have less onerous listing requirements — in Europe since 2007. Convertibles issuance accounted for the bulk of supply at €1.8bn — the highest amount on record.

As with the main exchanges, computers and electronics were by far the leading sector for IPOs on junior exchanges in Europe with €4.2bn of issuance, followed by healthcare (€1.23bn), finance (€814m) and real estate and property (€569m).

De-SPACs, when a SPAC is merged with another company, represented 5% of the total mergers and acquisition (M&A) volume in Europe in 2021, an increase from 2% in 2020. Of the announced SPAC acquisitions in Europe, 76% were de-SPACs of US-headquartered SPACs. In the US, de-SPACs represented 18% of the total announced M&A volume.

European private equity-backed M&A totalled €423bn in 2021, the highest amount on record. Meanwhile, strategic M&A deals totalled €758bn, the highest since 2018.

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