• Investors still demand hefty valuation discounts of up to 40%
• M&A remains an option for sellers disappointed by public market valuations

Another European IPO window is done, continuing a great start to the continent’s IPO year, but it is a long road to summer and there is considerable uncertainty surrounding the rest of the pipe.

Puig’s [BME:PUIG] IPO, priced last week, brings European IPO volumes to USD 11.5bn year to date, making it the best start to a year for European listings since the beginning of the global rate hiking cycle in 2022.

The recent run of IPOs has proven a solid start for Europe, with most trading well above offer, generating significant investor returns.

The window for new deals is still wide open until the summer. But while there are hopes of several new deals due to come, market players fear that there may not be much more before the market goes away for its traditional summer break.

“When we look at our pipe and what we expect to come, both our deals and away from us, it’s looking quiet,” said one ECM banker.

Two of the most notable IPOs that could arrive pre-summer are German bus and travel company Flix SE, backed by General Atlantic, and Permira-owned Golden Goose, the luxury Italian sneaker company.

Flix is planning a possible IPO launch in June or July, according to two sources working on the deal. But both sources indicated that the company’s reported valuation target of EUR 3bn-EUR 4bn might be difficult to achieve given heavy investor valuation demands.

This news service has regularly reported on the Flix IPO and various slowdowns in the process and it is unclear whether GA or Flix would be comfortable in pulling the trigger on a listing with ECM investors demanding a general discount of up to 40% to listed peers to take part in most new listings.

Flix and General Atlantic declined to comment.

The other big name in the pre-summer market is Golden Goose, which sources say is now eying a deal before summer. However, the listing had been scheduled to launch in the first weeks of April, but was delayed after a large valuation discrepancy between issuer and investors emerged in pre-launch pilot fishing.

One investor who was in the meetings spoke of a “big gap” between the buyside and Permira on valuation, which might be hard to bridge in a couple of months.

A source close to the company challenged the notion of a valuation gap, adding that there has never been any valuation divergence and Permira hasn’t set defined valuation targets. The source further pointed to Golden Goose’s double-digit revenue growth both in 1Q24 and FY23 despite a material slowdown in the wider market, attesting to the quality of the business.

Three other sources close to the deal expressed a degree of scepticism as to whether an IPO would be possible before the summer, given the large valuation gap between investors and Permira.

All options on the table

If the valuation gap between investors and Permira on Golden Goose cannot be bridged, the sponsor will likely turn to the other options on the table, said two of the sources.

There has been interest from specialist funds in Golden Goose, the sources said and the process was originally a dual track, as reported by this news service.

The first source close to the company batted away those concerns, however, and said there is no active M&A track on Golden Goose and that an IPO remains the priority.

The source noted that Permira had not committed to specific timings and that a launch will occur only with the right market conditions.

Both Permira and Golden Goose declined to comment.

Four possible 2024 IPOs are now seen as likely M&A candidates: Italcer, Stada Arzneimittel, Banca Progetto  and DKV Mobility.

Another IPO candidate, 2i Rete Gas, appears to be firmly on the listing track after rejecting an approach from Italgas [BIT:IG] to buy the company in favour of pursuing a 2H listing.

But should IPO investors prove to be less generous than sellers hope, then there is a suitor waiting to pounce.

The last-minute change of direction on Oaktree-backed Banca Progetto, which was on the verge of issuing an ITF before Centerbridge came in with a non-binding offer, should give banks pause and encourage earlier discussions with clients on achievable IPO valuations far earlier than in the days just before launch.

A source close to a large European sponsor noted that while there is no great thematic shift to sponsors pivoting to the M&A market over IPOs, most are now aware that they have to keep “all options” open.

Besides the success of some of Europe’s larger IPOs this year, some underperforming deals show that the IPO market is not fully open yet, he added. “It makes complete sense to also look at M&A, alongside an IPO, if you can,” he said.

Tempering client valuation expectations early on may be a painful job for any ECM banker still recovering from the great post-2022 drought.

But it is necessary.