[LONDON] Early successes bode well for firms wanting to raise money through European stock markets in 2015, according to bankers who earn handsome fees from such deals which surged last year.
Santander found investors eager for a 7.5 billion euro (S$11.8 billion) share sale announced on Jan. 8, with books being covered in just an hour.
And despite the New Year holiday, bankers seized the opportunity on Jan. 2 to relaunch German cable operator Tele Columbus's Frankfurt stock market listing.
Some bankers are expecting around 10 initial public offerings (IPOs) of shares to be launched across Europe in the coming weeks. "What was notable about last year is that you did see the full gamut of issuance," said Martin Thorneycroft, head of syndicate at Morgan Stanley. "Whether the market maintains that volume remains to be seen. It certainly could, but it will require market cooperation." Tele Columbus's offering was delayed amid market turmoil in the fourth quarter of 2014, and bankers expect other companies which postponed capital raising to try again. The share listings of firms including British bank Aldermore and French engineering services group Spie were among those postponed during the period.
Beyond share sales, bankers expect merger and acquisition (M&A) related financing to provide some of the bigger and juicier deals for the year. Among those, UK telecoms firm BT is expected to hold a rights issue for its acquisition of EE. "Right now we haven't got a list of monster deals," one senior equity capital market (ECM) banker said. "But it's very, very market dependent. The real question is stuff we can't see - major corporate carve-outs, big M&A capital raisings."
In 2014 European IPOs raised over US$65 billion in the year to Dec 15, up 87 per cent over the previous year, according to Thomson Reuters data, the highest since the financial crisis. Total equity issuance in the region hit almost US$264 billion, beating even the United States, at US$250 billion.
But concerns on global growth threw markets into turmoil later in the year, causing European deals worth US$2.5 billion to be pulled in October alone as the CBOE Market Volatility Index , the so called "fear gauge" of the stock market, spiked to three-year highs of 31.06.
The index closed at 17.46 on Friday. But market uncertainty and volatility remains as oil prices plummet, the euro falls, and geopolitical uncertainty roils countries such as Greece, pushing European shares to a loss of 1.1 per cent in the first full trading week of 2015.
The UK also has a general election in May, which bankers said could shutter the window for new deals around that time. "Markets dislike uncertainty - just look to Greece for a case study," said Dru Danford, Head of Corporate Finance at Shore Capital. "For the UK, an uncertain election result may negatively impact investor and in particular foreign investor appetite for UK issuance which could make 2015 more challenging."
Appetite from US investors accounted for over half of demand in some 2014 deals, according to Bank of America Merrill Lynch. Some bankers questioned how keen US investors would remain as their own economy shows signs of recovery. "I would advise clients to be diligent and flexible, and ready to tap markets at short notice," said Achintya Mangla, co-head of equity capital markets at JP Morgan.