Deal-makers are hoping that UK M&A returns to form

David Hellier
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AS WE head into the New Year the City will be cautiously optimistic about likely activity in the corporate finance markets in 2014.

Last year saw a major revival in the new issues or initial public offering (IPO) market, which had been virtually dead in 2012.

UK IPO revenue totals were 274 per cent up in 2013, according to data from Dealogic.

The year began tentatively, with a number of groups hoping to emulate the flotation of Direct Line in the autumn of 2012. A series of flotations took off relatively successfully, preparing the market for the jumbo issues of the Royal Mail group in October and then Merlin Entertainment in November, both of which were resoundingly successful.

However, a note of caution entered the market after a profits warning from annuity provider Partnership affected the flotation of Just Retirement.

This was followed by a massive one-day fall in the shares of Tinkoff Credit Systems, a Russian group that had floated in London.

Aside from these hiccups sentiment has held up and those in the market will be looking for similar if not greater activity in 2014, though there remains caution about the kind of prices sellers can achieve. Part of the reason the door closed on the market in the first place was distrust over pricing.

There will be much attention on the technology sector, with the London Stock Exchange’s high growth segment still to list its first company.

Maybe groups such as just-Eat or Zoopla can be tempted to float in London, while Candy Crush Saga owner King is headed for New York.

Strangely, perhaps, 2013 was a quiet year for mergers and acquisitions, with UK M&A at its lowest level for eight years as companies opted to consolidate or grow organically rather than through deal-making.

Some experts predict the possibility of a pick up in the year ahead.

Says Mark Gregory, EY’s UK economist and transaction partner: “For many, organic measures alone can no longer meet growth mandates and deals will be the best route to meaningful growth. Barring any further significant economic or geo-political shocks, we should see the resuscitation of the M&A market which has flat-lined in recent years.”