September 20, 2011 / 3:05 PM / 6 years ago

Dealtalk: Bankers plot deals, awaiting equity demand

LONDON (Reuters) - As choppy markets put the brakes on European equity fundraising, investment bankers at a loose end are lining up so many new deals that 2012 looks like it could be a record year if the trading environment improves.

Europe hasn't seen a big stock market flotation since July, with most share sales now on hold due to the uncertain outlook and depressed valuations.

But with many investment banks shedding jobs in a bid to cut down on costs, none of their employees wants to be found idle.

"We do expand our job roles," said one equity capital markets (ECM) banker usually involved with running offerings. "Origination is still busy so we obviously help out with that."

As banks redirect their teams into pitching for new deals, the process is becoming ferociously competitive.

"To a certain extent you create more work because you know everybody is doing the same kind of thing to outpace the others," said another ECM banker.

This drive to source new work is adding to an already long queue of deals postponed from earlier this year, as well as those which were slated for the fourth quarter.

"There is actually a bigger pipeline of potential deals in Europe than I have ever known in 20 years," said Sam Dean, global-co head of ECM at Barclays Capital, adding that if market conditions improved next year could be a record.

The biggest year for equity fundraising in Europe so far was 2007, when companies raised a total of $367 billion, according to Thomson Reuters data.

The total so far this year is $138 billion.

Share sales lined up for next year include Russia's 200 billion rouble ($6.4 billion) privatization of up to 15 percent of oil producer Rosneft (ROSN.MM), and the listing of Mongolia's Erdenes-Tavan Tolgoi, forecast by some bankers to fetch as much as $15 billion.

Multi-billion euro listings from German chemical maker Evonik and Siemen's (SIEGn.DE) lighting unit Osram are also now expected to take place in 2012.

REPAIRING RELATIONS

The list of new deals for next year may also gain from more companies postponing in the last three months of 2011.

If market conditions don't improve in time for companies to use freshly audited second quarter earnings in their listing prospectus, they are likely to wait until March or April next year to include full year results instead, bankers said.

"Well-sized, appropriately priced deals for good companies can get done even in these markets. But, unless we have a very strong market recovery, many transactions seem likely to be postponed," Dean said.

Bankers said they were also using the quiet period to work on improving relationships with investors after a string of disappointing offerings damaged trust between banks, advisors, investors and issuers.

A regular grumble from investors this year was that they did not get to meet IPO candidate companies early enough or for long enough, a problem now being rectified in the hope of a smoother ride for the next wave of new listings, whenever they may come.

"Investors are still interested in knowing what is coming," said one banker. "When things stabilize they will be looking for ways to improve their relative performance, and IPOs could give them that opportunity."

With so many companies to choose from when the floodgates open, investors will have the luxury of being picky -- making it likely only the most attractive companies, or the cheapest, will succeed, and possibly prompting another round of postponements. ($1 = 31.284 Russian Roubles)

Editing by Sophie Walker

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