* Growth in London IPOs outpaces most other major centres
* Private equity firms make a move after years of waiting
* Flows into equity funds, U.S. investors boost demand
* 2014 could see more strong IPO activity in London
By Kylie MacLellan
LONDON, Nov 15 London is having its busiest year
for stock market listings since the financial crisis struck and
companies and their bankers are pushing to complete more
offerings before 2013 draws to an end.
With listings typically taking about a month to complete
from launch, bankers say companies need to kick off initial
public offerings (IPOs) in the next few days if they are to be
completed before investors head off for the Christmas break.
Although many of Europe's economies are still struggling to
return to durable growth, equity markets have soared, boosting
the valuations and appeal of businesses in several sectors.
London's FTSE 100 share index is up around 14
percent this year and the pan-European FTSEurofirst 300 index
has risen around 15 percent.
A European IPO revival is under way after years of drought
due to the financial crisis and London is seeing the most
activity, with more firms going public there so far in 2013 than
in the same period of any year since 2007, according to Thomson
While equity fund managers are sitting on more money to
invest, company managers are growing more optimistic about the
business outlook - recent upbeat UK economic data point to a
sustainable recovery from the deepest recession since World War
IPOs allow funds to put big chunks of money to work in one
go at what is usually considered a discounted price.
And there has been a steady flow of listings to choose from,
as a calmer market tempts companies and their owners to test the
water again, many of them private equity firms needing to exit
their investments after many years.
Some companies have been courting potential investors for
months or years, helping smooth the process as investors have
had more time to understand the business.
"You have a sweet spot right now where investors
increasingly have more money that they need to put to work and
IPOs are a great opportunity for them," said one banker involved
in equity issues, who declined to be named.
Although the number of London listings as of Nov. 11 is the
highest in six years, the amount raised - $14.5 billion - was
surpassed in 2011. However, half of that year's total came from
one flotation - commodities trader Glencore, now Glencore
LONDON FUNDRAISING QUADRUPLES
The global volume of new listings has increased, but London
has seen a bigger rise than most other major centres, with a
more than quadrupling of the sums raised compared to the same
time last year.
The amount raised in Hong Kong is up around 280 percent on
last year, while volumes in the United States have risen 31
Although the UK market is still far from reaching the peaks
of 2006-07, when more than $50 billion was raised annually in
London, those lining up companies to bring to market next year
expect the flurry to continue.
"The UK is historically a very active market. If anything,
it has been a sleeping giant over the last few years," said Greg
Chamberlain, head of UK Equity Capital Markets at JP Morgan.
"Success breeds success. The better this year's IPOs trade,
the more people will trust investing in new deals. Next year
could be very active."
Research by Deloitte last week showed that, on average, IPOs
on London's main market this year had delivered returns seven
times greater than the FTSE 100.
Still, a longer-term look at the track record of companies
that go public suggests investors should be wary of any euphoria
around upcoming IPOs.
Data from private bank Kleinwort Benson shows that over the
past decade investor support was rarely rewarded within a year
MORE SENSIBLE PRICING?
One of the biggest drivers of activity in 2013 has been the
return of listings by private-equity backed companies, which
have been largely absent for the past few years after a string
of poorly performing deals made investors wary of taking part.
A more sensible approach to pricing has helped rebuild
trust, as well as private equity owners generally offloading
smaller stakes at the time of listing, advisors say.
Private equity-backed companies, including attractions
operator Merlin Entertainments and estate agency
Foxtons, account for more than a third of IPO money
raised in London this year, the highest proportion since 2004.
Flows into equity funds and U.S. investors turning their
attention back to Europe have helped boost demand, bankers said.
Those working on flotations said a return to volatility
prompted by a big macroeconomic shock was the biggest risk to
the continued success of the market. For now, companies continue
to press ahead, with retailers Poundland and Pets at Home
reported to be among those preparing an IPO next year.
Terra Firma's Infinis Energy made its market debut
on Friday, while Dubai luxury housing developer DAMAC Real
Estate is taking orders for a planned London listing.
"Issuers and sellers have been on a starvation diet for a
few years with no IPO market, so the pipeline is quite full,"
said one banker working in the sector. "Conditions for IPOs
continue to be very strong... But the window for this year is
closing pretty rapidly."