Investment bankers anticipate a broader resurgence of Europe’s Initial Public Offering (IPO) market in 2025, fueled by private equity firms seeking to divest holdings and generate returns, despite potential headwinds from trade tensions and political uncertainties.
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European stock exchanges have witnessed over $19 billion raised through IPOs this year, a significant increase of more than 30% compared to 2023. However, this figure remains below historical averages, including the highs experienced during the pandemic and the preceding decade.
European IPO Market Performance
Dealmakers express optimism about the continuation of this upward trajectory, with anticipated listings in early 2025, such as HBX Group in Spain and Stada Arzneimittel AG in Germany, potentially setting the stage for further IPO activity later in the year and into 2026.
Private Equity’s Need for Liquidity to Drive IPO Activity
“The current macroeconomic environment presents challenges for IPOs next year,” acknowledges Lawrence Jamieson, Co-Head of ECM for Europe, the Middle East, and Africa at Barclays Plc. “However, the imperative for sellers, particularly private equity firms, to return capital to limited partners is likely to outweigh all other considerations.”
Buyout and venture capital firms currently hold trillions of dollars in unrealized investments. The abrupt surge in borrowing costs following the COVID-19 pandemic led to a decline in valuations, resulting in substantial losses for investors who participated in IPOs during the era of low interest rates.
Impact of Interest Rates on Valuations
With interest rates now declining and stock markets reaching record highs, these firms are becoming more receptive to the prospect of IPOs as a means of unlocking liquidity.
“The scarcity of IPOs this year stems from a reluctance on both sides of the equation – issuers and investors,” explains Richard Cormack, Head of ECM EMEA at Goldman Sachs Group Inc. “We are observing a shift in sentiment, with a convergence occurring across various factors, including the bid-ask spread.”
Geopolitical Risks and Potential Catalysts
Several prospective IPO candidates deferred their plans to 2025 this year, citing uncertainties surrounding the US election. Risks to the 2025 outlook include potential tariffs on foreign goods threatened by US President-elect Donald Trump. Such measures could negatively impact European stocks amidst political instability in France and Germany, the region’s largest economies.
Conversely, advisors hope the significant valuation gap between US and European stocks will attract investors. Trump’s potentially inflationary policies could also accelerate interest rate reductions in Europe.
“It’s crucial to look beyond these geopolitical risks,” advises Andrew Robinson, Head of HSBC Holdings Plc’s ECM business in EMEA and its Global ECM Syndicate. While investor selectivity will persist, “they remain open to considering suitable IPO opportunities.”
Despite prevailing uncertainties, equity indices are trading near all-time highs. Andreas Bernstorff, Head of ECM at BNP Paribas SA, suggests a “reasonable probability” of further stock market gains if interest rates continue to decline. “We believe 2025 presents a confluence of factors that could create a favorable window for new issuances,” he commented.
Successful 2024 IPOs and Future Pipeline
This year’s most successful offerings involved private equity firms, including Swiss skincare giant Galderma Group AG, French software firm Planisware SA, and even buyout house CVC Capital Partners Plc itself. These deals were priced attractively and experienced post-IPO price appreciation, allowing shareholders to reduce their positions.
“2024 demonstrated the functionality of the IPO market and the value of listings and follow-on offerings as monetization avenues for sponsors,” stated Valery Barrier, Head of EMEA ECM at Citigroup Inc.
Successful IPOs in 2024
However, not all deals have performed equally well. Shares of CVC-backed Polish convenience store Zabka Group SA and German perfume retailer Douglas AG are currently trading below their issue price, despite their IPOs being among the region’s largest this year. Other candidates, such as Spanish bakery firm Europastry SA and Italian sneaker maker Golden Goose SpA, postponed their listing plans.
Beyond private equity-backed businesses, European companies facing pressure to streamline operations and enhance shareholder value are expected to contribute to the IPO pipeline in 2025. Germany’s Continental AG is proceeding with plans to spin off its car parts business, while Sweden’s Embracer Group AB intends to spin off its Asmodee Group AB unit.
Anticipating a Broader Range of IPOs
“Corporate carve-outs remain prevalent, and we continue to operate in an environment of shareholder activism,” observes James Palmer, Head of ECM EMEA at Bank of America Corp. “I anticipate this dynamic will persist on both sides of the Atlantic.”
Larger deals have dominated Europe’s IPO market, with approximately 70% of the capital raised this year originating from offerings exceeding $500 million each, according to Bloomberg data. Advisors are confident that the market will become more accessible to mid-sized companies.
“While it’s not a market where anything goes, the top-performing IPOs have excelled,” notes Martin Thorneycroft, Global Co-Head of ECM at Morgan Stanley. “I expect a gradual expansion of the market to encompass a wider range of companies.” The confluence of these factors suggests a promising outlook for the European IPO market in 2025.
