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Uncertain times for European Equity Capital Markets European Equity Capital Markets update SUMMER 2022
Uncertain times for European Equity Capital Markets
Content
0 Welcome
1 HY 2022 Equity Markets Performance
2 European Equity Issuance Levels
3 Dutch CFO Survey
4 How to be your own activist?
5 Why now is a great time to start preparing for an IPO
6 Deloitte Equity Capital Markets
About this report: This report contains data sourced from IMF Word Economic Outlook April 2022, Bloomberg, Refinitiv, FactSet, Dealogic, company admission documents and press releases. ECM
issuance data is as of 30 June 2022 and includes all European ECM transactions. The Total Deal Value has been calculated by multiplying Dealogic’s Total GBP Deal Value and the GBP spot rate of the
date of the transaction. Additional market data is as of 30 June 2022
0 Welcome to the Deloitte European ECM update Summer 2022
A challenging macroeconomic environment and geopolitical instability have set global equity
markets in the first half of 2022 to the slowest start in a decade
This European ECM update covers the equity market performance and Inflation threats have been latent since the end of 2021 but were
provides commentary and analysis of the performance and trends of heightened after Russia invaded Ukraine. War-induced commodity
European ECM for the first half of 2022. We analyse the different factors price surges have increased IMF’s 2022 inflation expectations for
currently affecting global economies and how these negatively impacted advanced economies to 5.7%.
equity markets’ performance and significantly reduced European ECM and
IPO issuance levels. In this report, we dive deeper into two Hot Topics: Central Banks around the world have had different strategies, with
“How to be your own activist?” and “Why now is a great time to prepare for an the UK and the US opting for a fast-track interest rate hike route,
IPO”. while the European Central Bank is lagging behind, with its first
interest rate hike expected for July.
Ronald Bakker Following the exceptional year that 2021 was for equity markets, several
Partner – Head of Capital macroeconomic conditions such as high inflation, central bank tightening Volatility was high throughout the first half of the year, with the VIX
Markets Audit & Assurance
policies and a war that exacerbated supply chain disruptions, while at a 26-level average. Such uncertainty had a clear effect on
Tel: +31 6 2025 2483
Email: robakker@deloitte.nl provoking a soar in commodity prices, have impacted global GDP growth equities, especially growth stocks, with investors looking for value
which is expected to decrease to 3.6%. Europe has been especially hit stocks and moving towards more defensive sectors.
hard by Ukraine’s war, given its Russian energy dependency. As a result,
Euro Area 2022 GDP growth is expected to decrease by 1.1% to 2.8%. The Dutch market has suffered considerably. The AEX lost 17.4% in
the first half of 2022, which was worse than some of the other
European indexes, such as the UK FTSE 100, Spanish IBEX 35 and
Figure 1: Global indices performance HY 2022 the French CAC 40. That market conditions have been peculiar in
the first half of 2022 is demonstrated by the magnitude of the
105
Justin Hamers performances of AEX’s leaders and laggards, that vary between
Partner – Head of Capital approximately -70% and +25%.
95
Markets Financial Advisory
Tel: +31 6 5151 5372
Email: jhamers@deloitte.nl 85 European ECM has been lagging, with issuance levels down by 65%,
75 which is the lowest level in a decade. And no exception for IPO
markets which are down by 89% compared to HY 2021’s volume.
65
01-01-2022 01-02-2022 01-03-2022 01-04-2022 01-05-2022 01-06-2022
We hope you find the ECM Update a helpful resource. Our team is
-2.9% FTSE 100 -16.5% Euro Stoxx 600 -29.5% Nasdaq
at your disposal for any issues that you may wish to discuss.
-17.4% AEX -20.6% S&P 500
Source: Refinitiv Eikon (30/06/2022)
© 2022 Deloitte The Netherlands. All rights reserved. Uncertain times for European Equity Capital Markets | Summer 2022 3
HY 2022 Equity Markets Performance
1 1H 2022 Equity Markets Performance
A changing macroeconomic and financial context
Figure 2: Inflation (change y/y) – selected markets The first six months of 2022 have been chaotic. So far, it has Meanwhile, in the UK, the Bank of England (“BoE”) increased its
10 seen the start of a war between Ukraine and Russia, interest rates four times this year, with the latest in June to set the
commodity price rises, ongoing supply chain disruptions, rate at 1.25% - a 13-year high - as it estimated inflation to hit 11% in
8
persistent inflation, and Central Banks’ tightening policies - all autumn 2022. Markets expect interest rates to reach c. 2.5%-3.0%
6 of which have heavily impacted stock markets and caused a by year-end.
4 significant slowdown in global GDP growth.
2 And clearly lagging behind is the European Central Bank (“ECB”),
0 All of this has come in the aftermath of a global pandemic which is expected to end quantitative easing and raise interest
jun-21 sep-21 dec-22 mrt-22 jun-22 1Q23e 4Q24e caused by COVID-19, which by now has become less deadly, rates twice by year-end, with a first rate hike in July, likely to be
and due to previous government stimulus, many countries increased by 0.25%. In an emergency meeting in June, the ECB
Eurozone UK US were expecting to grow significantly this year. announced the creation of a new tool to address the risk of euro
zone fragmentation to avoid a debt crisis.
Figure 3: Interest rates – selected markets
However, since the last quarter of 2021, inflation has been on
3,5 the horizon and has started to become progressively a threat The IMF estimated the global economy to end the year with a 3.6%
2,5 for most major economies. This threat became more evident GDP growth. GDP growth revisions have been uneven across the
as Russia invaded Ukraine, creating additional price world. For example, the US has only seen a minor revision (-0.3%)
1,5
pressures, due to the rise in commodity prices and to its growth prospects, and its GDP growth is expected to be at
0,5 exacerbating ongoing supply chain frictions. This has led 3.7% by year-end.
-0,5
Central Banks to take measures to curb inflation, such as
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3e Q4e
ending stimulus packages and quantitative easings as well as
The Euro-area economy and its growth prospects have been
2019 2020 2021 2022 rising interest rates.
severely affected by the war as the EU has a vast dependency on
ECB FED BoE Russian gas and oil. Despite the headwinds, the GDP forecast for
Central Banks around the world have shown different 2022 remains at 2.8% despite a c. 1.1% decrease compared to IMF’s
strategies and timing implementation, the first countries to estimations back in January 2022. However, the threats to the
Figure 4: GDP growth (y/Y) – selected markets act were certain Latin American and Eastern European economy remain latent and we still have to see how markets react
countries which already started increasing interest rates in to ECB’s policy tightening, thus potentially further affecting current
5 2021. The US and the UK have followed with a much faster estimations.
interest rate hike schedule than previously anticipated. The
0 US Federal Reserve (“Fed”) have raised interest rates three
Having completed the first steps of recovery from Covid-19, 2022
2019 2020 2021 2022e 2023e 2024e times so far, and in June raised them by 75 basis points for
was expected to be a good year for the Dutch economy, which now
-5 the first time since 1994 leaving the official interest rate at
has been affected by the war and greater inflation expectations.
1.5% - 1.75%. And based on the latest Fed indication and
Current Dutch Central Bank (“DNB”) estimates inflation at 8.7% for
-10 market expectations, it won’t be the last one; 2022 may see
2022, and current IMF estimations put the 2022 expected GDP
several hikes between 0.25%-0.75% to put Fed funds rates at
Eurozone Netherlands US UK growth at 3.0% for the Netherlands, slightly above the Euro Area
c. 3.5% by end 2022.
Source: Refinitiv Eikon, and Bloomberg (30/06/2022) average of 2.8%.
© 2022 Deloitte The Netherlands. All rights reserved. Uncertain times for European Equity Capital Markets | Summer 2022 5
1 1H 2022 Equity Markets Performance
Uncertainty over markets with significant movements within and between equity indices
So far in 2022, macroeconomic turmoils and geopolitical
instability had an undeniable effect on stock markets
Figure 5: European indices performance
105
The ongoing changing environment has also affected the
volatility within the market, with the VIX range bounding
around the world. All of this comes after a buoyant 2021, 100 between 16.3 and 38.9 during the first six months of 2022,
where equities outperformed, with major indices ending 95 with the average for the first half of 2022 at 26.4 – well
the year with gains and at record highs. 90 above the 16-level average during pre-covid times (2018-
85 2019).
However, that picture has radically changed in 2022. Most 80
global indices are underperforming, and the risk factors 75 It is worth highlighting that currently, the number of shocks
Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22
affecting markets, such as inflation, war, and supply chain affecting the global economy are numerous. In the past,
disruptions, remain. Major global indices have ended the -7.1% Ibex 35 -2.9% FTSE 100 -19.5% DAX any one of these shocks, such as inflation spikes, central
first half of 2022 as follows: S&P500 down by -20.6%, the -17.2% CAC 40 -22.1% FTSE MIB -17.4% AEX
banks’ tightening, war, or supply chain disruptions could
DAX down by -19.5%, the AEX down by -17.4%, the CAC 40 have dragged the global economy down to a recession and
down by -17.2%, the Stoxx 600 down by -16.5%, the IBEX Figure 6: Volatility (VIX) there could be high uncertainty levels for a prolonged
35 down by -7.1% and the FTSE 100 down by -2.9%. It is 40 period of time. However, that is not the current situation.
worth highlighting the sharp decline that US indices have 35 Coming out of a pandemic, it seems markets have learned
experienced during the start of 2022, with technologies how to digest severe news more quickly, and despite
30
and growth companies suffering and dragging the indices having an impact on growth, the consequences have not
25
down, especially tech-heavy Nasdaq, which closed the first been as severe as the worst-case scenarios may have
half of the year down by -29.5%, its worst first half 20 looked like.
performance in 50 years. 15
Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22
Sector wise, most European sectors remained in negative
UK’s blue-chip index, the FTSE100, has shown more Figure 7: Stoxx 600 sector market performance territory with the clear exception of Oil & Gas sector,
resilience than the average with a -2.9% loss by the end of Oil&Gas 12,6% benefiting from price surges following Russia’s invasion of
the first half of 2022, as banks, commodity-related Telco 0,0% Ukraine; and defensive sectors such as Telco, that had a
Healthcare -6,5%
companies, and defensive sectors (such as consumer and Basic Resources -7,1% flat performance. On the other side of the spectrum, retail
healthcare) continue to show positive performance. The Insurance -10,9% and tech companies are the worst-performing sectors
Food & Beverages -12,2%
Dutch main index, the AEX, suffered significantly with its - Utilities -13,2% among European stocks.
17.4% loss. Especially the tech-companies have suffered Banks -13,9%
Stoxx 600 -16,5%
exceptional losses, as the macroeconomic uncertainty has Personal & Household -17,3%
The Netherlands continues a similar trend as Europe with
moved investors towards historically more stable sectors. Media -17,9%
Chemicals -19,8% Tech, Industrial Goods, Construction & Materials and
Automobiles & Parts -24,8%
Tourism & Leisure -25,2% Chemicals being among the worst performing sectors,
In line with the Stoxx 600 sector market performance, the Financial Services -25,7% driven by higher energy prices, supply chain disruptions
Construction & Materials -26,3%
AEX losses were restrained to some extent through its Industrial Goods -27,2% and less risky investment behaviour, which are among the
funds in the Oil & Gas and the Telco sector, that have Real Estate -31,5%
Tech -32,4%
largest sectors within the AEX index by market value.
reported increases north of 20% in the first half of 2022. Retail -36,6%
Source: Refinitiv Eikon (30/06/2022)
© 2022 Deloitte The Netherlands. All rights reserved. Uncertain times for European Equity Capital Markets | Summer 2022 6
Equity Issuance Levels
2 European Equity Issuance Levels
1H 2022 was one of the most challenging starts in decades for European ECM issuance
Following an extraordinary year in 2021 for Equity Capital Markets, 2022 has had one of the Figure 8: European equity issuances since 2018
most challenging starts in decades, and the worst in the last decade. Proceeds from European 70 500
ECM transactions amounted to €45.4bn over 603 transactions during the first half of the year - FO IPO # Deals
450
60
a decrease of 65% in volume compared to the same period in 2021. 400
24
50 23
The significant slowdown in ECM activity is partly explained by the poor equity market 18 350
4 9
performance driven by a distressed macroeconomic environment. Since the start of the year, 40
300
#deals
44
€bn
43
inflation fears accompanied by Central Banks’ tightening significantly increased volatility levels, 9 6 39 39 40 250
30 14 12 12
with the VIX hitting record highs and reaching 38 in January. The high volatility made the 31 6 32 2
200
1
pricing of ECM transactions difficult. All of this was exacerbated by Russia’s invasion of Ukraine 20
23 1 25 25 24 25 150
4 10 23
3
in late February. 20 4 100
10 16 15
13 13 50
As mentioned previously, the VIX average level for the first half of 2022 was 26, well above the
0 0
20-level threshold that ECM dealmakers advise to price IPOs. This of course had a major 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q
impact on European IPO issuance levels, which have decreased by 89% in volume compared
2018 2019 2020 2021 2022
to the same period in 2021. Follow-Ons issuance, including Rights Issues and Accelerated
Source: Dealogic (30/06/2022)
Blocks, have also been severely affected, but at least to a lesser extent than IPOs, decreasing
by c. 52% during the period compared to 1H 2021.
Figure 9: 2022 equity issuances volume by sector and by country
The financial sector was the most active one in terms of European ECM issuance, accounting
for 23% of the total transaction volumes in 1H 2022. In fact, three out of the Top 10 ECM deals,
were accelerated bookbuild by banks. This was the case of Nordea’s €1.8bn block, Deutsche’s 23%
25%
27%
€1.3bn deal, and Barclays’ €1bn transaction. The largest deal has been EDF’s €3.2bn rights 37%
issue, followed by Air France-KLM €2.2bn rights issue.
It is no coincidence that utility and energy-related companies are among the top ECM sectors, 15%
9%
accounting for 15% of the ECM transaction volumes in 1H 2022, as they are also 19%
outperforming the market, as seen within the Stoxx 600. 6% 10%
12%
7% 10%
The UK continued to be the most active ECM market within Europe, both in terms of ECM
volumes (c. €11.6bn) and deals priced (206) during the 1H 2022. The second most-active Finance Utility & Energy United Kingdom France Sweden
Computers & Electronics Transportation
venue was France, where €8.5bn were raised over only 38 transactions. The Netherlands had Germany Norway Others
Real Estate Others
only nine transactions raising a total of €748m.
Source: Dealogic (30/06/2022)
© 2022 Deloitte The Netherlands. All rights reserved. Uncertain times for European Equity Capital Markets | Summer 2022 82 European Equity Issuance Levels
A first half marked by an IPO drought with SPACs and energy-related deals accounting for half of the money raised
Macroeconomic and geopolitical instability had a clear effect on IPO issuance across
Europe, with only 105 deals pricing and raising €5.3bn. This accounts for a decline of
Figure 11: European IPOs since 2018
25 180
89% compared to the first half of 2021 and the worst start of the year in terms of €m # Deals 160
IPOs in the last decade. 20 140
120
Eight SPACs above €50m came to market during the first half of the year and raised 15
100
#deals
€bn
€1.4bn, accounting for 27% of the IPO volume raised during the period. Meanwhile, 23 24 80
10
another four IPOs above €50m were linked to energy-related companies, raising 18 60
14
€.1.0 bn. This includes the largest IPO year to date, Var Energi, a Norwegian leading 5 9 10 12
9
12 40
6 6 20
Oil & Gas producer, which raised c. €775m in its February IPO. All in all, SPACs and 4 4 4 3 2
0 1 1 0
Energy, accounted for c.47% of the IPO volume raised in 2022. 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q
Out of the energy companies that came to market with an IPO above €50m in 2022, 2018 2019 2020 2021 2022
three were hydrogen-related. A sector that has clearly benefited from Ukraine’s war Source: Dealogic (30/06/2022)
as Europe looks for an action plan to move away from Russian gas dependency. During the first six months of 2022, Italy took the reigns from the UK for the most active
Due to the market instability, many companies opted to postpone or cancel their IPO listing venue by IPO volume, accounting for 25% of the money raised in Europe. And in
plans, such was the case of Dutch fintech WeTransfer, Spanish bank Ibercaja or Eni’s second place was Norway with 24% of the money raised during the period - however, the
renewables arm called Plenitude. vast majority came from Var Energi’s IPO. The UK, accounted for 13% of the IPO volume. In
terms of number of deals UK was also replaced as the most active venue by Sweden, where
Figure 10: 2022 IPOs by sector and equity volume issuances by country 30 transactions priced versus the 27 IPOs that saw the UK. Recent transactions point to a
French ECM revival (i.e., Lhyfe, Haffner Energy, EureKING, etc.), which has priced 8 deals and
raised €394m.
15%
21%
28%
25% So far in 2022, Dutch ECM has been lagging behind, and same applied for the IPO market,
6% where only 2 IPOs have priced in the Dutch Main Market during HY 2022. Both of those IPO’s
8% 8%
are Special Purpose Acquisition Company (SPAC) IPOs. The decrease in number of IPOs is
considerable, given the total of 10 IPOs completed in the first half of 2021. As a result, the
9% Netherlands lost considerable in the European market share of equity volume issuances.
16% 24%
27%
13% The current unfavorable market conditions have made several companies decide to
postpone their planned IPOs. This trend started already late 2021 with the cancellation of the
Finance Computers & Electronics Italy Norway
United Kingdom Sweden
Coolblue IPO, followed by WeTransfer that cancelled its IPO early 2022, and those are only
Oil & Gas Transportation
Real Estate Others Netherlands Others the publicly known examples. On the other hand, the Dutch market did see 4 new companies
enter the stock market through a merger with a SPAC (‘De-SPAC’), which demonstrates that in
Source: Dealogic (30/06/2022) adverse market circumstances, SPACs might still remain a route to become listed.
© 2022 Deloitte The Netherlands. All rights reserved. Uncertain times for European Equity Capital Markets | Summer 2022 92 European Equity Issuance Levels
European IPO Barometer
In the first 6 months of 2022, only 21 Figure 12: Deloitte’s European IPO Barometer 1H 2022
European IPOs were priced above
56,8%
€50m, which raised c. €4bn. This
55,0%
accounts for a 94% decrease in volume
from what we saw back in 1H 2021 from
similar transactions. 45,0%
38,3% 38,1%
Out of those deals, eight were SPACs, 33,9%
35,0%
where little to no changes in prices are 30,4% AVG growth
expected until a Business Combination +14.0%
is announced. Therefore, when looking 25,0%
at how IPOs performed in this first half, 18,1%
we excluded SPACs, which took us to a 15,0%
+14.0% average (+8.0% with SPACs)
performance of IPOs so far in 2022. This 4,3%
5,0%
would already be a good performance 0,0% 0,0% 0,0%
in normal times, however, due to the AVG growth
-1,5% -1,0% -1,3% -1,3%
poor performance of European indices -5,0% +8.0%
-4,4% -5,2% -4,3%
(STOXX 600 -16.5%), a +14.0% gain is an including SPACS
-7,6%
-9,7%
outstanding achievement. So far in -15,0% -11,4% -11,6%
2022, IPOs have outperformed the
STOXX 600 by 30.5 percentage points.
European IPOs well above market
average performance is an encouraging
sign for a future market reopening.
However, there are many other factors,
including volatility, sector performance,
Source: Eikon (30/06/2022)
and investors’ appetite. We will have to
Industrials Real Estate C. Non-Cyclicals Technology SPACs
wait to see how the second half of the
year evolves. Financials Energy Basic Materials AVG growth
© 2022 Deloitte The Netherlands. All rights reserved. Uncertain times for European Equity Capital Markets | Summer 2022 10Dutch CFO survey
3 Dutch CFO Survey - A damper on economic recovery
Our bi-annual CFO survey collects input from over 1.300 Chief Financial Officers across Europe. Below we have included a summary of the Netherlands-based CFOs’ financial outlook. As
the direct impact from the pandemic faded, CFOs were looking towards a brighter 2022 than the preceding two years. However, the results show that new concerns regarding the
current geopolitical situation, inflationary pressure and supply chain issues are influencing CFO sentiment across the board. A notable finding is that CFOs expect supply chain issues to
persist until at least the second half of 2023. Particularly shipping costs and intermediate goods form bottlenecks for CFOs and their companies’ operations. Most CFOs highlight an
increased focus on growth in existing markets over expansion into new markets. Overall, financial prospects are trending downward. However, compared to the EU average,
Netherlands based CFOs are still relatively optimistic.
Financial outlooks are showing signs of distress.
The percentage of Dutch CFOs that feel optimistic has significantly decreased compared to the autumn edition, encompassing a total of 45% of the overall
respondents. This is the third time in the last seven years that the aggregate CFO sentiment on the financial outlook is negative.
Revenue expectations are the lowest since the 2016 spring edition.
Similarly, expectations for operating margins have decreased to a net balance of 5%. CAPEX expectations over the next 12 months are in line with these
developments and have decreased by more than half compared to the last edition. Although all indicators remain positive, a significant decrease in
performance is expected across all financial metrics measured in the survey.
The impact of geopolitical tension
Current tensions between Russia and NATO seriously impact the global economy and Dutch CFOs perceive geopolitical risks to be the largest risk to their
company over the next 12 months. As the global economy experiences major setbacks, we see that the majority of Dutch CFOs appears to be reluctant to add
greater risk to their balance sheets. With a net balance of -66%, the risk appetite ends up lower than 2 years ago, when the pandemic started to have its
effects.
Inflation is on the rise.
The CFOs’ expectations for inflation have risen markedly, to 6% for both the Netherlands as well as the Euro area. This is significantly higher than expectations
from CFOs in other countries in the Euro area. Although the expectation seemed exorbitant, the current situation teaches us that even higher inflation
numbers are expected in the period ahead (this survey was conducted in March 2022 – April 2022).
Of the Dutch CFOs, 75% indicate their companies are affected by supply chain issues.
The main bottlenecks reside in the supply side: low product availability and higher costs are a common denominator for CFOs. Nearly 50% of CFOs expect to
put effort into diversification of suppliers and distribution routes to mitigate these issues. Almost half of CFOs presume it will take at least until the second half
of 2023 before supply chains will return to their pre-pandemic state.
For all the results of the Dutch CFO survey – visit the report: Dutch CFO Survey
© 2022 Deloitte The Netherlands. All rights reserved. Uncertain times for European Equity Capital Markets | Summer 2022 12How to be your own activist?
4 How to be your own activist?
An introduction to value creation through shareholder activism
Shareholder activism How do activist campaigns work?
Shareholder activism is booming, with 2022 seeing the busiest start to the year in nearly The typical modus operandi for activist investors is to quietly build a stake in the company before
a decade at 73 activism campaigns in 1Q 2022 alone. While the US still accounts for most approaching the management and board, or going public with demands. If the company has a
activist activity, European companies have increasingly become targets, with 31 good Investor Relations team, they will probably have identified that an activist is buying shares
campaigns started so far this year. The appearance of an activist investor on the well before the position is made public. A few points to note about activist campaigns:
shareholder register usually moves the share price, requires significant attention from
• Activist investors sometimes have surprisingly small stakes in companies but can still be
senior management and the board and provokes a great deal of attention from analysts
effective. Bluebell Capital was able to agitate for change at Danone via a stake of less than 0.1%.
and the media.
• Financial exposure can be built via derivatives and shares can sit in nominee accounts, making
Figure 13: Quarterly number of activism campaigns - Global
an assessment of their “true” ownership and voting power difficult. After one activist fund has
73 taken a position, others often also buy in; the so-called “wolf pack”
57 59 58 55
• Activists don’t normally try to take control of the target company, although they may seek to
54 52 50
46
41
replace management or gain board representation
39
26 29
• Getting support from other stakeholders is critical for the activist. Existing shareholders may
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
support their proposals privately (and occasionally publicly). Sell-side analysts are lobbied to
2019 2020 2021 2022
provide endorsement of the activist’s demands.
Source: Harvard Law (28/04/2022)
The activist landscape Be your own activist
Depending on definition, there are more than 100 activist investment firms globally, While activists may pursue a range of strategies and tactics, their approaches are often based on a
controlling assets in excess of $200 billion. Unlike index-following passive funds or active common set of beliefs. The arrival of an activist investor places an extraordinary strain on senior
managers, who pick stocks based on company fundamentals, activist investors take management and the board. The demands from the activist may involve very public criticism of
stakes in companies with the objective of bringing about change, hoping to increase the key personnel, track record and company strategy. As part of the journey to “becoming your own
value (and share price) of the target company. For example, activists may be seeking to activist,” boards must first understand the views that motivate activists. In Deloitte’s new
bring in new management, compel a company to sell an under-performing or perspective, “Be your own activist”, we distill some of the prevalent views that may tie together
undervalued division, cut costs or change its capital allocation strategy. Other activist activist approaches. Deloitte can help companies carry out self-assessments to support their value
campaigns focus on corporate governance, management remuneration or challenging creation opportunities, divestments and “disruptive” M&A, which targets small, fast-growing
the company on sustainability. businesses and technologies to capture innovation-led growth.
Over time, activist investors have generally tried to re-badge themselves as “engaging” Deloitte can help companies carry out self-assessments to support their value creation
with companies rather than confronting them. However, companies that refuse the opportunities, divestments, and “disruptive” M&A, which targets small, fast-growing businesses
activist’s demands usually find the relationship becomes increasingly hostile. and technologies to capture innovation-led growth.
Be your own activist | Deloitte | Finance
© 2022 Deloitte The Netherlands. All rights reserved. Uncertain times for European Equity Capital Markets | Summer 2022 14Why now is a great time to start preparing for an IPO
5 Why now is a great time to start preparing for an IPO
European ECM activity has peaked in 2021, before slowing considerably in 1H 2022
Introduction 1 - Build your team
2021 unquestionably was an exceptional year for capital markets and initial public offerings. A successful transition to a public company requires a great team that is prepared to lead what
the company will become, in addition to what it is pre-IPO.
Euronext Amsterdam data indicates 32 completed deals in 2021, of which 23 initial public
offerings, with a total deal value of nearly € 14 billion. An astonishingly successful year. To put The importance of exceptional talent cannot be overstated. It’s also much more difficult in this
these numbers into perspective, Euronext Amsterdam noted only 2 IPOs in 2020, out of the tight labour market to find the right people to take the IPO journey with you. In fact,
total of 12 completed deals that year, worth slightly north of € 6 billion. organisations are leaving positions unfilled until the perfect candidate, preferably one with
public-company experience, presents oneself.
Figure 14: Euronext Amsterdam deal activity
Top-shelf compensation packages, which will likely need to be examined to manage existing
32 and new equity incentives, can attract the right players. Human resources departments should
12
Value: €14B
Total
consider compensation, disclosure and analysis reporting requirements; the Remuneration
Value: €6B 23 Report is the way companies tell their compensation stories to investors.
2 IPO
Companies should also examine internal talent to identify future leaders, discern the skills and
2020 2021 experience they will need to grow the company, then develop a leadership pipeline and
succession plan. This includes personnel for both the front and the back office, and a focus on
The stock market in 2022, if anything, has slowed considerably. In the first half-year of 2022
compliance and financial management.
Euronext Amsterdam activities have been limited to a number of de-SPAC transactions (e.g.
Azerion, Cabka and FL Entertainment) and the listing of two new SPACs. Financial planning and investor-relations talent, meanwhile, is a must as a company prepares
to go public.
The IPO market is expected to perk up when geopolitical tensions ease, inflation moderates
and interest rates settle. That is why now, until that favourable market materialises, is a More likely than not, a company’s business objectives and goals will shift once it is listed; a new
great time for companies considering a public offering to start preparing for that exciting operating model and organisational structure may be necessary to navigate that change.
event in an organisation’s life.
Deloitte Equity Capital Markets has served several IPOs in 2021, including one of the largest
IPOs, of Allfunds Group plc, and several SPACs. From that experience and having worked
on multiple other IPOs in the past, comes four suggestions for companies considering to
take the IPO path, once market conditions are favourable:
1) Build your team.
2) Focus on the efficiency and effectiveness of your close process.
3) Employ tech and artificial intelligence (AI) to streamline your process.
4) Solidify your corporate governance.
© 2022 Deloitte The Netherlands. All rights reserved. Uncertain times for European Equity Capital Markets | Summer 2022 165 Why now is a great time to start preparing for an IPO
Further considerations when preparing an IPO in the current IPO climate
2 - Focus on the efficiency and effectiveness of your close process Automation tools such as R&IA are digital assistants that can provide humans with
superpower processing speeds. In addition, automating repetitive and mundane tasks frees
A huge difference between being privately held and publicly listed: the detail and sheer
up financial professionals to apply their skills to strategic and value-added initiatives for the
importance of financial reporting. Companies need to close books quickly each quarter and
company.
provide accurate financial reporting to investors.
There are risks and factors to think through, though. Instituting R&IA or any other new
In short, there’s a lot more scrutiny from a much bigger audience. The typical preparation for
financial technology involves embracing change, training on the new technology, making
this includes two quarterly dry runs of closing and reporting financial results.
decisions about legacy systems, and recognising the need for stakeholder commitment and
To meet those needs, companies readying for an IPO will have to examine their current close governance.
processes — and that includes both people and technology — and figure out how to optimise
them for speed and accuracy.
4 - Solidify corporate governance
The keyword here is streamlining. The process and the systems for reporting requirements, as
well as budgeting, planning and forecasting, that work well at a privately held firm may not be A talent-stuffed boardroom and audit committee are key to a successful IPO. And like sourcing
streamlined enough to meet the time demands of a listed company. leadership talent, it’s neither a quick nor easy process. Given the hundreds of companies that
completed an IPO or special-purpose acquisition company (SPAC) transaction in the past two
These processes need to be examined. Related internal controls need to be identified,
years, filling board and audit committee roles has become a more nuanced process,
documented and included in an Internal Control Framework. Any bottlenecks need to be
particularly when companies are sensitive to diversity and inclusion.
removed.
The lesson? Start the process to fill these critical roles a year—not the traditional three
Another consideration is the International Financial Reporting Standards based reporting and
months—before an IPO. Companies should also do their homework; board composition and
other financial and non-financial reporting requirements, such as on Environmental, Social
structure have requirements dictated by the chosen listing exchange as well as stakeholder
and Government (‘ESG’).
expectations. Additional management committees and charters may be considered.
Deloitte’s Boardroom programs can be a resource. The Boardroom programs offer exclusive
3 - Employ tech and AI to streamline your process tailor-made solutions supporting board members and non-executive directors in the private
This is the time to switch to contemporary and leading-edge technology. and public sector in the Netherlands. From our CFO program to our Executive Women
Program, Deloitte focusses on all aspects within the boardroom..
Robotic & Intelligent Automation (R&IA) is a combination of artificial intelligence and
programmable software. In summary, preparing for an IPO can typically take nine months to a year. The current slower
IPO market offers an ideal time for companies with an eye on the Euronext Exchange, or any
There is a general misconception that R&IA can cost millions of euro’s and take several years similar market, to take these important steps toward a smooth and successful initial public
to implement, but in reality, it can be up and running in a matter of weeks and the related offering.
costs can be surprisingly modest.
© 2022 Deloitte The Netherlands. All rights reserved. Uncertain times for European Equity Capital Markets | Summer 2022 17Deloitte Equity Capital Markets
DELOITTE EQUITY CAPITAL MARKETS | Team overview
Equity Capital Markets team – Deloitte Netherlands
Audit
Ronald Bakker Dennis de Vries Victor Westra Oliver Cotton Tom Bourgonje Wytse Dijkstra Niels Kleisma Jeffrey Groot
Partner and head of ECM Director Senior Manager Senior Manager Manager Manager Junior Manager Senior Staff
robakker@deloitte.nl ddevries@deloitte.nl vwestra@deloitte.nl ocotton@deloitte.nl tbourgonje@deloitte.nl wydijkstra@deloitte.nl nkleisma@deloitte.nl jefgroot@deloitte.nl
Financial Advisory Remuneration
Justin Hamers Joost Goesten Karin de Sousa Nobre Darryn Haltmann Philip Siekman Roel van der Weele Paul de Winter Ron Noordenbos
Partner Partner Partner Manager Partner Director Senior Manager Tax specialist
jhamers@deloitte.nl jgoesten@deloitte.nl kdesousanobre@deloitte.nl dhaltmann@deloitte.nl psiekman@deloitte.nl rvanderweele@deloitte.nl padewinter@deloitte.nl rnoordenbos@deloitte.nl
Tax Resilience, Crisis & Reputation Valuations
Caspar Dekker Vincent Maas Martijn Koedijk Jos Boerland Frédérique Demenint Danny Tinga Maurits van Maren Casper Schiernecker
Partner Partner Partner Director Partner Director Partner Senior Manager
cdekker@deloitte.nl vmaas@deloitte.nll mkoedijk@deloitte.nll jboerland@deloitte.nl fdemenint@deloitte.nl dtinga@deloitte.nl mvanmaren@deloitte.nl cschiernecker@deloitte.nl
© 2022 Deloitte The Netherlands. All rights reserved. 19DELOITTE EQUITY CAPITAL MARKETS | European team members
Selected European ECM team members
Spain Austria Bulgaria Belgium Croatia
Tomás de Heredia Javier Fernandez Galiano Mayrin García Arzola Albert Hannak Bernhard Hudernik Alex Zahariev Nico Houthaeve Vedrana Jelušić
tdeheredia@deloitte.es jfernandezgaliano@ mgarciaarzola@deloitte.es ahannak@deloitte.at bhudernik@deloitte.at azahariev@deloittece.com nhouthaeve@deloitte.com vjelusic@deloittece.com
deloitte.es
Czech Republic Denmark Estonia Finland France Germany
Jan Brabec Bjørn Würtz Rosendal Sumit Sudan Eneli Perolainen Lars Bjorknas Kirsi Vuorela François Champarnaud Andre Konopka
jbrabec@deloittece.com brosendal@deloitte.dk ssudan@deloitte.dk eperolainen@deloittece.co lars.bjorknas@deloitte.fi kirsi.vuorela@deloitte.fi fchamparnaud@deloitte.fr akonopka@deloitte.de
m
Germany (cont’d) Hungary Iceland Italy
Andreas Faulmann Joerg Niemeyer Oliver Rattka Balazs Csuros Runolfur Thor Sanders Davide Bertoia Stefano Marnati Gabriele Arioli
afaulmann@deloitte.de jniemeyer@deloitte.de orattka@deloitte.de bcsuros@deloittece.com runolfur.thor.sanders@ dbertoia@deloitte.it smarnati@deloitte.it mpizzi@deloitte.it
deloitte.is
Ireland Latvia Lithuania
David Kinsella Marc Rogers Craig Bale Janis Dzenis Linas Galvele
davkinsella@deloitte.ie mrogers@deloitte.ie cbale@deloitte.ie jdzenis@deloittece.com lgalvele@deloittece.com
Norway Poland Romania Sweden
Are Skjøy Anne Randmæl Jones Iver Lykke Tomasz Ochrymowicz Ioana Filipescu Thomas Strömberg Sofia Schön
askjoy@deloitte.no annejones@deloitte.no ilykke@deloitte.no tochrymowicz@ ifilipescu@deloittece.com tstroemberg@deloitte.se sschoen@deloitte.se
deloittece.com
Switzerland United Kingdom
Flurin Poltera Oliver Koester Matthew Howell Robert Beeney Jim Brown Simon Olsen
fpoltera@deloitte.ch okoester@deloitte.ch mahowell@deloitte.co.uk rbeeney@deloitte.co.uk jimbrown@deloitte.co.uk solsen@deloitte.co.uk
© 2022 Deloitte The Netherlands. All rights reserved. 20DELOITTE EQUITY CAPITAL MARKETS | Selected credentials Equity Capital Markets team Deloitte Netherlands
Selected Credentials
Azerion EFIC1 JDE Peet’s Just Eat Takeaway European FinTech Allfunds
IPO de-SPAC Bond issuance Offering and US listing IPO Company 1 IPO IPO
2022 2021 2021 2021 2021
€1.7b €2.0b €6.1b €382m €2.2b
JDE Peet’s Infopro Maxeda DIY Just Eat Takeaway DSC 2 DSC 1
IPO High yield Bond High yield Bond UK listing IPO IPO
2020 2020 2020 2020 2020 2020
€2.6b €685m €420m €6.9b €110m €80m
Argenx Heineken Argenx Schoeller Allibert Instone Real Estate
Secondary Offering Bond Secondary Offering High yield Bond IPO
2020 2020 2019 2019 2018
€785m €1.5b €502m €250m €430m
Dutch Star B&S Group VolkerWessels Takeaway.com Philips Lighting
Companies One IPO IPO IPO IPO IPO
2018 2018 2017 2016 2016
€55m €358m €575m €350m €5b
© 2022 Deloitte The Netherlands. All rights reserved. 21Powering ahead | Deloitte Equity Capital Markets
ECM service offerings
Independent IPO Advisor Carve out financials Public Company M&A
• Truly independent advice throughout • Support and advice on carve-out design • P2Ps, public offers, hostile takeovers
the IPO process (operational and financial) and
• Act as lead adviser on either the buy-side
implementation
• Offer and transaction structuring advice or sell-side of the transaction
• Support on preparation of carve-out
• Assistance with adviser selection • Advice on corporate restructurings and
financials
• Input into equity story demergers
• Support and advice on transaction
• Project and syndicate management (ECM or private sale) matters • Support and advice on preparing bid
• Analysis and coordination of investor
defence procedures
marketing
IPO Auditor IPO Assist Reporting Accountant
• Audit the financial statements • Typically, where we are not acting as • Underwriter due diligence
included in the prospectus auditor to the company • Working capital reporting
• Providing comfort to the • Support and advice where and when • Profit forecast reporting
underwriters needed
• Pro Forma opinion
• Assessing the control and governance • Services include project management,
environment seconding staff, building models and
working as an integrated part of the
company’s team
IPO Readiness Post-IPO Support Tax and Remuneration Advice
• Help companies prepare for an IPO • Help management handle the transition to • Tax structuring, including domicile of
a NV Topco
• Readiness assessment with a key findings
report. Identifies deficiencies that may delay • Assist with preparation of first set of • Advice on arranging executive and
or prohibit an IPO public financials, audit of financial employee remuneration plans
statements, ongoing analyst liaison
• Scope covers financial and commercial and results announcements • Benchmarking remuneration structures
areas against other listed companies
• Ongoing corporate governance advice
• Design remediation plan to address and support • Implementation and documentation of
shortcomings prior to IPO kick-off remuneration plans
© 2022 Deloitte The Netherlands. All rights reserved. 22Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms, and their related entities (collectively, the “Deloitte organization”). DTTL (also referred to as “Deloitte Global”) and each of its member firms and related entities are legally separate and independent entities, which cannot obligate or bind each other in respect of third parties. DTTL and each DTTL member firm and related entity is liable only for its own acts and omissions, and not those of each other. DTTL does not provide services to clients. Please see www.deloitte.com/about to learn more. Deloitte provides industry-leading audit and assurance, tax and legal, consulting, financial advisory, and risk advisory services to nearly 90% of the Fortune Global 500® and thousands of private companies. Our professionals deliver measurable and lasting results that help reinforce public trust in capital markets, enable clients to transform and thrive, and lead the way toward a stronger economy, a more equitable society and a sustainable world. Building on its 175-plus year history, Deloitte spans more than 150 countries and territories. Learn how Deloitte’s more than 345,000 people worldwide make an impact that matters at www.deloitte.com. This communication contains general information only, and none of DTTL, its global network of member firms or their related entities is, by means of this communication, rendering professional advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No entity in the Deloitte organization shall be responsible for any loss whatsoever sustained by any person who relies on this communication. © 2022. For information, contact Deloitte Netherlands.
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