Despite a brisk IPO year in 2021: legal risks, disclosure requirements and short-winded investors are deterring companies from going public in large Western countries.

The number of publicly tradable companies has fallen sharply in America and Germany in this millennium - in this country by two-fifths.

The investment company Carlyle points this out.

"This is a relatively dramatic development," said her co-head of the classic private equity business in Europe, Gregor Böhm, at the International Club of Frankfurt Business Journalists (ICFW).

He sees his industry as a balancing factor.

"That has been absorbed by private equity."

Klaus Max Smolka

Editor in Business.

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Globally, the trend has not been consistently confirmed: according to the World Bank, the number of listed companies has remained fairly stable at around 43,000 since 2006, after decades of steady growth.

The picture is different in Germany. The World Bank counted 438 listed companies in 2020, roughly the same number as in the 1980s – but much less than at the turn of the millennium and later in 2007. Compared to the peak value of 761 from that year it was recently 42 percent lower.

In the United States, according to calculations by the management consultancy McKinsey, the number shrank by a good quarter to 4,000 in the first twenty years of the millennium.

Carlyle even calculates a drop by half.

Stricter requirements

Life on the stock exchange is made more difficult by formal requirements, which have become more stringent over the past two decades and have been significantly shaped in the USA.

"Very high compliance costs" - i.e. for complying with the rules - are also identified by Carlyle as a deterrent.

There are also legal risks because – again, especially in the USA – claims for damages have become the norm, often as class action lawsuits.

In addition, patents and intellectual property are becoming more relevant in many cases, "which one does not like to publish," as Böhm said.

In general, companies are no longer so dependent on the market because they can finance themselves with loans cheaper than ever.

If a change of ownership is planned, financial investors are ready with bulging coffers around the world.

According to Böhm, last year there were four times as many companies in private equity hands as in 2000, and their returns were higher than those of listed companies.

For an IPO, on the other hand, companies have to disclose their business in detail and then report up-to-date every quarter.

It is better to invest in the long term off the stock exchange, an argument that has been heard remarkably often in recent years, for example in the Zooplus case.

Böhm also mentioned this.

Carlyle is in the process of taking the Schaltbau rail technology group off the stock exchange.

On the other hand, financial investors still need the stock market as an option to exit investments - and then praise this route as advantageous for the company in specific cases.