Almost one in three expect to see some bursts of early IPO activity in the first half of 2023, with these views being shared mostly by large international banks that generally place IPOs with an offer size above £250 million.

The expectation is that while investors are cautious, large carve outs, ESG-focused quality businesses or those with compelling valuations or high dividend yields remain attractive.

Aadam Brown, head of independent equity capital markets advisory at KPMG UK, commented: “While the findings show that UK ECM leaders recognise the uncertainty in the market and the requirement for a recovery in sentiment over the next few months, there’s more optimism for the second half of the year. Most of the leaders we surveyed anticipate that quality businesses will be able to buck the trend and list successfully.

“The focus on the latter half of 2023 feels right as the number of new companies preparing to IPO pre-summer - excluding those already waiting in the wings - remains depressed, which is unsurprising as it can take at least six months to prepare for a listing.

“The UK IPO market this year has been muted in comparison with 2021, and depressed equity markets was highlighted by respondents as the biggest impediment to its recovery. However, this is interrelated with various other factors including high inflation, the interest rate hiking cycle, consumer spending and FY22 earnings.

“The return of fund flows into UK equities is also a factor which will play a key role in the market’s recovery, as redeployment of capital into UK equities is crucial for IPOs. While the second half of the year is badged as the period for activity to largely return, the first half of 2023 will be crucial, as it’s during this period that we’ll have greater visibility of the extent, duration and impact of these factors.”

When asked which sectors are expected to lead the opening of the IPO market, almost three in five leaders identified energy – specifically energy transition or renewables. While several other key sectors were mentioned such as business services, tech or tech-enabled companies, healthcare and financial services, some expressed the view that companies coming to list will be defined first by quality rather than sector.

Mr Brown explained: “The bottom line is that investors will be looking for resilient high-quality businesses, with good management teams and a strong and differentiated equity story.

“The outlook will be more positive for those who have managed to navigate the challenges of the last few years in a stable position with decent revenues, profitability and growth. These companies are more likely to capture the attention of investors in the early stages of the next IPO cycle.”

Looking ahead at what 2023 may bring for equity capital transactions, almost three in four leaders (72%) believe the bulk will be focused on repairing or defending balance sheets, which was strongly followed by M&A for consolidation plays by 64% of respondents.

Mr Brown concluded: “Whenever volatility bites, it has a domino effect on the IPO market as confidence is king, and we’ve seen this play out over the past year, as investors have generally pivoted away from participating in new issues and have focused on their existing portfolios.

“That being said, our findings show that most banks have a healthy pipeline of UK IPOs waiting for better market conditions, and many are also expecting a number of existing listed companies to recapitalise next year as they look strengthen their balance sheets. There will also likely be capital raised for both growth and M&A opportunities.

“Ultimately, this means that the companies currently looking to prepare for a listing must ensure that they are ready and able to take advantage of a return to more positive sentiment in the market.”