IPOs to decline again in 2009: report

The number of initial public offerings (IPO) is expected to decline further in 2009
as the global financial crisis continues to make it difficult to access capital
markets, Ernst & Young says.
The company says there were just 69 IPOs in 2008, which was less than a third of the
record high of 234 listings in 2007.
Ernst & Young managing partner of strategic growth markets Jon Dobell said the sharp
declines on stock markets in 2008 meant taking a company public was now a very
expensive source of funds for companies to pursue.
"The global financial markets hit share markets and hit share prices so
substantially during that year that those companies that were in the pipeline to
look at listings, a lot of them pulled the pin," Mr Dobell said on Monday.
As a result, Mr Dobell said companies will spend the next 12 months exploring other
funding options, as well as trying to find savings within their operations during a
period of consolidation.
"What you're seeing is that those companies that either can't access the capital
that they wanted, or could access it but aren't prepared to pay the price, are
looking at their own businesses very hard," Mr Dobell said.
Australia's benchmark S&P/ASX200 index backpedalled 41 per cent in 2008, while the
broader All Ordinaries index plunged 43 per cent.
Among the cancelled listings in 2008 was the frequent flyer program of Qantas
Airways Ltd.
The company said in September "that in this period of heightened market volatility
it would be appropriate to defer the IPO".
"Preparations would continue for a minority IPO in the first half of 2009," Qantas
said in a statement at the time.
Mr Dobell said many private equity firms had reconsidered floating businesses they
had acquired over the past four or five years, given the unfavourable market
conditions.
"A lot of the private equity players are saying 'we're prepared to stay in this for
a bit more of a longer haul'," he said.
Mr Dobell said there could also be a net drop in the number of listed companies in
Australia in 2009, as they consider a return to private ownership due to the market
turmoil.
"With the substantive drop in share price there's a number of companies, and a
number of private equity players as well, that are asking the question, 'are things
undervalued?'," Mr Dobell said.
"And if we are in this for the longer term, is there an opportunity to take pubic
businesses back into private hands."
He expects some "fairly recognised organisations" to consider that option.