Inside Track: JP Morgan is outpacing rivals in UK equity transactions
WHEN the venerable David Mayhew sold 50 per cent of Cazenove to JP Morgan 10 years ago, there were many who predicted the gradual demise of the influence of that august stockbroking house.
After all the City memory bank is filled deep with the names of institutions, such as Warburg, Kleinwort Benson and Smith New Court, that no longer have a meaningful commercial influence in the new world.
Even though Cazenove is now fully integrated into JP Morgan, its legacy and its business lives on. Because of its Cazenove inheritance, JP Morgan is corporate broker to more FTSE 100 companies than any other bank. Brokerships aren’t profitable business silos on their own account, but they do more often than not provide the introduction for banks to work on lucrative merger and acquisition or other related equity transactions.
Hence yesterday JP Morgan emerged as adviser to Babcock on the industrial group’s £900m rights issue; it has been broker there for 15 years. Earlier this week the US bank advised RSA, the insurance group.
The statistics on UK deals in 2014 make for extremely comfortable reading at JP Morgan. The bank has acted on 21 UK equity deals so far this year, 14 more than the nearest rivals in terms of quantity of deals, UBS and Numis.
The deal flow has been strong in the first quarter, with new issues very much back in favour. JP Morgan made use of its contacts with private equity houses to get on board more than its fair share of IPOs, including Poundland, Just-Eat, Circassia and AO World.
UBS shows commendable improvement in reaching joint second place with Numis and Goldman Sachs is top in Europe, Middle East and Africa.
WHY KING SHOULD HAVE STAYED PUT
King, the British game developer behind the mobile game Candy Crush Saga, decided last year to head for the US for its flotation. In doing so, it hoped to gain a higher valuation for its business. As it turns out, I think the company, run by Riccardo Zacconi (who built the company up in the London market), made a big mistake.
Partly hampered by more restrictive American rules on communication, and partly due to having had to find new advisers, it has failed to dispel the notion that its fortunes depend entirely on one game, which currently makes up three quarters of its revenue.
It has been all too predictable for US investors and media to liken the group to US-listed Zynga, whose shares have performed badly since flotation. It’s impossible to prove but I think the London market would have been more understanding.
david.hellier@cityam.com