September is upon us and, with it, the opening of Europe’s autumn IPO window to be led by German academic publisher Springer Nature, owned by Holtzbrinck Publishing Group and BC Partners.

Springer’s IPO is a familiar name for ECM investors. The company previously attempted an IPO in 2018, but that effort was withdrawn. Today it is a very different proposition to the company that tried to list in 2018, but the sellers will need to be cognizant that it is selling into “a buyers’ market” investors and sources said.

The German publisher is one of the few big-ticket IPOs left to hit European exchanges this year. An unsuccessful deal, or a decision not to go ahead with a listing should an acceptable price not be secured, would see Europe’s new listing market ending on a whimper after a roaring start to the year.

A different beast

Two sources close to the deal said the company is back in a very different shape to the last time, with one pointing out that, unlike the first IPO attempt, the company is unlikely to need vast amounts of primary capital to right its balance sheet as it did in 2018.

The company also has an interesting equity story to tell.

In a video on its website, Springer Nature states it has embedded artificial intelligence into the heart of its strategic offering by helping researchers to better translate data into their reports, translate books into different languages and automate research quality checks.

Also, as a publisher of academic content, its material can also help feed other AI language models.

“AI is the driver of the whole sector and is a huge growth engine for the business,” said one of the deal sources. “Springer Nature is in a great position because it is content that fuels AI.”

Utilising how a business can apply itself to artificial intelligence functions can add rocket fuel to an IPO.

Another company that leaned into its AI applicability, while not being a pure AI player, was Reddit [NYSE:RDDT]. Just before it launched its listing, the social media company signed a deal with Google allowing the search giant to use its content for training artificial intelligence models.

Reddit’s share price has soared since listing and, while it has come down a little from its July highs, the stock is still trading 67% above its IPO price.

“Investors have been receptive,” said a second deal source – industry tailwinds and the performance of peers have bolstered the equity story. “Market volatility won’t play a major role as this is not a pure tech stock.”

Buyers’ market

BC Partners is reportedly going to seek an enterprise value of around EUR 9bn when it launches the IPO, likely this week.

However, most sources speaking to ECM Pulse noted that valuation would be hard to achieve, while a third source close to the deal said it was unclear where that reported valuation had come from.

Using peers Relx [LON:RELX] and Informa [LON:INF], two of the closest listed companies to Springer Nature according to sources, ECM Pulse calculated a possible valuation for the company, using data provided by Fidessa and complied by FactSet. 

Using Springer Nature’s 2023 sales of EUR 1.85bn, Springer Nature could trade at an enterprise value of around EUR 10.8bn on a 2023 Sales/EV multiple average of the two peers, without any IPO discount.

It would trade at around EUR 7bn if it were to trade in line with Informa and around EUR 14.4bn when compared to just Relx.

Equity indices are strong, especially with interest rate cuts baked into investor assumptions over the next few months.

European equity investors are also sitting on strong gains. ECM Pulse’s sister column ECM Explorer showed that, as of the end of August, investors had banked over USD 4bn in IPO gains.

It also shows that European new listings have delivered a 22% return for investors YTD, beating European and even US benchmark indexes.

But despite positive tailwinds, investors are leaning into conservatism.

Throughout the year sources have told ECM Pulse that IPO discounts need to be around 20% to 30% to peers to have a chance of success in a tricky market, and sources say this demand from investors has not changed.

While Springer Nature’s target numbers will be likely based on forward-looking estimates for 2024/2025, which will be released by analysts in IPO marketing, Springer Nature will have to come in at a decent discount to satisfy those investor demands.

“It’s all down to valuation, things are better than they were, but it comes down to price. Issuers need to realise when they bring a deal that this is very much still a buyers’ market,” said one ECM investor when reflecting on Europe’s IPO market through to the end of 2024.

Issuers that have priced IPOs at a discount to their peers have found themselves sitting on far more valuable companies, and BC Partners might look at the example of EQT [STO:EQT] which last week sold a hefty chunk of Swiss skincare company Galderma [SWX:GALD].

The Swedish sponsor priced the IPO of Galderma at a significant concession to French peer L’Oreal [EPA:OR], but in last week’s block managed to sell at a premium to its French comparable, showing the benefits of a patient approach to sponsor exits.

“The key is to price this right and let the aftermarket drive demand,” said the second deal source. “Being conservative is key in this market.”

BC Partners and Springer Nature declined to comment; Holtzbrinck Publishing Group did not respond to requests for comment