With the first month of the year out of the way, most investment bankers are beginning to feel a little bit chirpier – at least those of them lucky enough still to be in a job.
In Europe, January has brought a few large deals to the markets, including ArcelorMittal’s $3.5bn (£2.21bn) mandatory convertible bond and the sale of a 12 per cent stake in the Polish lender PKO BP to raise $1.75bn for the government there.
In the UK, in a deal advised by JP Morgan and Deutsche Bank, Phoenix, the life assurance group, finally made a breakthrough in its restructuring talks with its banks as it unveiled a £250m equity issue as part of a debt repayment plan.
The deal was unusual in that Sun Capital, one of the company’s major shareholders, found an equity partner in Och Ziff and took much of the pressure off the bank advisers.
But there’s also no doubt that the relative stability of the financial markets played a part in getting the deal done now rather than at any other time in the past 18 months that it has been discussed.
One senior equity capital markets banker told me this week that he’s looking at a 15-20 per cent uplift in deals this year, comprising increases in mergers & acquisitions, sales of large stakes and equity and debt money raisings. “The dialogue is more focused,” he said.
Sadly the upturn in Europe’s capital markets doesn’t yet seem to have filtered through to London’s still struggling IPO market.
Investors consider the market virtually dead, although there are signs of life with the imminent flotation of the housebuilder Crest Nicholson.
Advisers to this deal, which is expected to value the group at around £500m, began bookbuilding yesterday, having marketed in Edinburgh and New York as well as London and Frankfurt.
Some have criticised bank syndicates in the past for not seeing enough institutions but Barclays, Numis and HSBC insist they will see hundreds of different potential investors before the deal closes, sometime in mid-February.
Unlike the flotation of Direct Line, the insurance group that was partly sold off by RBS bank before Christmas, there will be no retail offering. Advisers say this is a size thing, but it’s a pity nonetheless.
The great hope for retail participation will be the flotation of the Royal Mail, if it ever comes off. On that one advisers feel there is a real chance of involving the retail investor in a way that hasn’t happened since the privatisations of the 1980s.
Meanwhile, the debate over the IPO process continues. Legal & General Investment Management (LGIM) has proposed several changes, including a plan that fees for the banks should be based on a post issue share trading performance.
One suggestion being advocated by STJ Advisors, capital market specialists, to further the investor education process, is to encourage a company being listed to allow analysts to attend the pre-IPO analysts’ briefing session, even if the analyst’s firm is not part of the syndicate. That sounds sensible to me.