A huge CHF 4.9bn (USD 6.2bn) trade from Swedish sponsor EQT in Galderma proved that deal activity is still possible in Europe despite the escalating conflict in the Middle East – but the picture for IPOs remains highly problematic.

The Galderma sale, which took place after market close on 10 March, was so popular that EQT and a consortium of co-investors were able to upsize the transaction, transforming it into a clean-up trade.

This deal, the largest in Europe so far in 2026, was the third billion-dollar-plus European block since the outbreak of the war at the start of March.

Investor capacity for large, accelerated transactions seems undimmed by the conflict between the US and Iran, although it must be noted that the names that have been brought to market were all highly expected.

Source: Dealogic

EQT has repeatedly sold down its stake in Galderma since listing the asset in 2024 and was widely expected to do so again. But choosing to undertake a full exit of such gargantuan size, instead of undertaking a smaller deal given the volatility of global markets, took a measure of steel.

An ECM banker noted that he expected similar activity on other good days for stock markets, with issuers primed to take whatever windows they can to sell stock, particularly other private equity sellers with a need to keep showing they can return capital to their LPs.

A slower start to European equity issuance this year also created a backlog of demand, with January and February unusually quiet for follow-ons.

“There is so much capital chasing these deals that it has created a supportive environment for ECM transactions, despite the market volatility,” the banker said.

Another impediment to IPOs

As ECM Pulse wrote before the war in Iran, the European IPO picture was looking more difficult following a vicious sell-off in US and global software stocks driven by fears over the impact of AI.

The war in the Middle East has complicated matters even further given it has led to a spike in oil and natural gas prices close to levels seen following Russia’s invasion in Ukraine. Brent Crude is now trading around USD 103/bbl.

Europe is uniquely exposed to the crisis in the Middle East because of its dependency on Gulf energy, following the outbreak of war in Ukraine.

“The market reaction in Europe has been much more severe than in the US,” noted a second ECM banker.

“European issuance is possible, but with volatile markets you need strong fundamentals and clearer visibility to execute transactions. Investors demand more demonstrable proof points from issuers.”

Alongside the impact of higher energy costs on individual businesses, the spike in energy prices fundamentally alters market expectations on interest rates.

According to CME’s FedWatch tool, the probability of a rate cut by the US Fed before October is now less than 50%, a far more pessimistic outlook than just a week ago.

While rate traders do not expect the Fed to begin hiking, a hold in rates through most, if not all, of 2026 weakens the picture for equities the rest of the year. If inflation begins to rise due to sustained higher energy prices, it could force central banks to turn hawkish.

There are also legitimate concerns over how sustained higher energy costs could impact consumer pockets, as they did in 2022, stymieing the revenues of businesses deriving sales from discretionary spending.

In this environment, it is tough for investors to analyse company growth estimates when considering IPOs unless there is a clear picture of recurring revenues.

There are a few issuers who fit this bill, such as European defence contractors and utilities, given the theme of further investment in European electrification.

This could present opportunities for IPO candidates like Franco-German arms business KNDS, or energy businesses like Spain’s Inis Energy or Germany utility company Uniper.

But even in defence, a sector that is going from strength to strength given greater global turmoil, IPO candidates are being cautious.

Star Capital-backed Vincorion, a German manufacturer of military drive systems, is Europe’s only live IPO, following on from Gabler Group, a German manufacturer of subsea defence components which priced an IPO on 4 March.

Despite being a key supplier to European countries committed to rearmament, Vincorion’s IPO banks – led by Berenberg, BNP Paribas and JPMorgan – have opted for a conservative structure.

IPO books opened on Vincorion this morning (Monday 16 March), utilising a fixed price structure at the more conservative end of the valuation range it was exploring with investors.

It also signed up three large institutional cornerstones to take over a third of the deal, despite a modest deal size of EUR 300m.

The strategy appears to have paid off, with the transaction multiple times oversubscribed on the full deal size, according to a deal note seen by ECM Pulse.

A banker close to the deal noted that there was even some discussion in the syndicate over whether to launch the deal at all, given huge losses on the German DAX on 3 March, just a few days before pre-marketing kicked off on 6 March.

The unclear length of the war remains a key concern, with IPO investors and issuers still in the dark over whether the global economy is facing a prolonged period of far higher energy costs than expected, or whether the conflict can be wrapped up quickly, the Straits of Hormuz re-opened and key energy supply-lines restarted.

Some speaking to ECM Pulse this week voiced hopes that US President Donald Trump would be incentivised to end the war as quickly as possible, especially given the US midterms in November.

However, like Pandora’s box, the war in the Middle East may have unleashed forces that are now hard to contain, let alone stop.

The longer the fog of war lingers over 2026, the murkier the outlook gets for European IPOs.