Rothschild Sees Several ‘Big’ German IPOs After Equities RallyAnnette Weisbach
Rothschild expects a rally in European equities to drive share sales in the continent’s biggest economy.
“It is a good market for IPOs in Germany this year,” Martin Reitz, head of the financial advisory firm for Germany, Austria and Switzerland, told reporters in the town of Koenigstein im Taunus, located about 20 kilometers northwest of Frankfurt, late yesterday. “I expect that several big initial public offerings will happen.”
Germany’s benchmark DAX index climbed to 8,074.47 earlier this month, the highest level since 2007, as the European Central Bank maintained its forecast that the region will gradually recover. Germany was the second-biggest market in Europe for initial public offerings after the U.K. last year, with 2.1 billion euros ($2.7 billion) of sales, according to a report by consulting firm PricewaterhouseCoopers LLP.
“The current level of valuations will trigger transactions,” Reitz said.
More than 7.4 billion euros of new shares were sold to the public in Germany in 2007, the year before Lehman Brothers Holdings Inc. collapsed, data compiled by Bloomberg show.
Reitz said he also expected volume in mergers and acquisitions to at least equal the level of last year, even though 2013 has begun slowly.
More than 700 companies or stakes in companies were sold in Germany in 2012 with a total volume of $65 billion, according to data compiled by Bloomberg.
Rothschild ranked third in advising on mergers and acquisitions in Germany last year after Goldman Sachs Group Inc. and Deutsche Bank AG, with a market share of 29 percent, according to data compiled by Bloomberg.
The main risk to a recovery in Europe is currently the crisis in Cyprus, Reitz said.
“No one can define the contagion risk if Cyprus should go bust,” he said. “It would be wrong just to write a check without exerting pressure to reform. What we see now is a normal negotiating game.”
Reitz said banks in Europe are having difficulty finding buyers for the assets they’re offering for sale, as they seek to increase capital and bolster profit.
“There is a massive over-supply of bank assets in Europe for which there are no buyers,” he said.
While 45 percent of the world’s banking assets are in Europe, they generate just 7 percent of profits in the industry globally, he said.