Private Equity Vs. IPO: A Performance Comparison in Europe

For many founders, ringing the opening trading bell of the NYSE or LSE as their company goes public is a distant dream and a sign they have made it. However, the IPO market today may look less glossy to business owners weighing their financing options.

Amid geopolitical instability and market uncertainty, the traditional IPO market across Europe and the UK saw limited activity in 2022 with proceeds down almost 80%, only €15.6bn compared to the previous year’s €75.0bn. Public equities performance decreased alongside it with a number of large 2019-2021 vintage IPOs trading far below their issue price: Deliveroo -74%, THG Holdings -83%, and Oatly Group -86%, for example.

Meanwhile, private equity deal count and deal value are estimated to have slightly increased; PitchBook data shows 2022 European private equity deal value totaling €737.8bn, more than quadrupling over the past ten years. PE growth/expansion deals accounted for €76.7bn of the total deal value.

While IPOs have historically been viewed as an exit opportunity for investors, PE exits are increasingly driven by buyouts and acquisitions, with only 6% of PE exits realised through public listings in 2022.

Although public markets offer benefits to companies including liquidity options and increased visibility to potential customers and partners, businesses may experience pressure to deliver short-term results while upholding regulatory and reporting requirements. Companies that may have previously been labeled ‘IPO-ready’ may delay listing in exchange for Series D+ growth rounds or private market secondary options.

Companies considering financing options should be aware of the growing number of opportunities the private equity market has to offer, with over €200bn left of dry powder to deploy across European funds.