Europe’s equity bankers rush to snag deals ahead of US vote
They expect sell-down volumes to pick up after the election, as mergers and acquisitions activity returns
EQUITY capital market bankers are rushing to finalise a fresh slate of deals in Europe, before the US presidential election and an earnings blackout period bring an anticipated slowdown in activity.
Fuelled by rallying stock markets and the expected easing of interest rates, companies in the region have raised nearly US$76 billion across European exchanges so far this year, an increase of 17 per cent over the same period in 2023, showed Bloomberg data.
Third-quarter dealmaking was more muted. However, the past few weeks have seen a flurry in initial public offerings (IPOs), as well as an uptick in accelerated stock sales as the Nov 5 US vote compresses the autumn timetable.
“IPOs for companies that are of the right quality, right size and rightly priced are getting done,” said Saadi Soudavar, co-head of equity capital markets for Europe, Middle East and Africa (EMEA) at Deutsche Bank.
While there may be a window for further IPOs after the US election, “most IPO candidates in our pipeline are aiming for 2025”, he said.
Polish convenience store giant Zabka Group leads October’s IPO hopefuls, as investors including CVC Capital Partners seek to raise as much as US$1.7 billion in Warsaw’s biggest first-time share sale since 2020.
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Academic publisher Springer Nature priced its 522 million euros (S$747.2 million) German IPO this week. Meanwhile, Spain’s Europastry and the UK’s Applied Nutrition could go public before the election.
In the Middle East, local investors have led more than US$5 billion in IPO-activity so far this year, indicated Bloomberg data.
The Gulf region could see fewer interruptions in the calendar than Western markets, said Richard Cormack, co-head of equity capital markets in EMEA at Goldman Sachs.
“For IPOs, you start running into Thanksgiving, so we’re not expecting much activity after the election, with the possible exception of in the Middle East,” he said.
An unrelenting flow of share sales in already-listed companies have happened over the past few weeks. Firms and their shareholders are taking advantage of higher stock prices, with Pfizer selling a £2.4 billion stake in Haleon this week.
Other recent deals include buyout groups EQT and Warburg Pincus cutting their stakes in Galderma Group and Ionos Group, respectively after their public offerings.
“We’re starting to see an uptick in the number of sell-downs from IPOs that priced this year or in previous years,” said Andrew Briscoe, head of equity capital markets syndicate in EMEA at Bank of America.
Bankers expect sell-down volumes to start tapering in the coming weeks as the third-quarter earnings season’s trading restrictions near. They add that volumes could again flare up on the other side of the election.
There could also be more fundraising by companies already listed in the coming months, as mergers and acquisitions (M&A) activity returns.
“We’ve seen a lot less primary issuance from listed companies than the market would like,” said Aloke Gupte, co-head of equity capital markets international at JPMorgan Chase.
“Conditions are ripe for more front-footed and M&A-related capital raises.”
Investors will be watching announcements from Danish transport and logistics giant DSV, which needs to raise as much five billion euros in new equity to fund its acquisition of DB Schenker.
Bankers are confident that the market has capacity to absorb new supply, with traditional investors such as mutual funds showing up in numbers for the right transactions.
High levels of share buybacks have boosted investors’ cash levels, while the positive trading of most recent IPOs shows that capital markets are working well, Goldman’s Cormack said.
“Long-only investors are definitely stepping up,” he said. “The average long-only participation in accelerated placings and even IPOs is running at multi-year highs.” BLOOMBERG
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