PracticeConsultingKPMG survey shows lull in IPO activity

KPMG survey shows lull in IPO activity

Corporate finance work has fallen off a cliff in the first three months of 2001.

The latest figures from KPMG Corporate Finance on new listings revealed that IPO activity had almost entirely dried up.

The only major listing was Orange, the international mobile phone operator, which accounted for virtually all of the Pounds 3.99bn raised on the official list.Caffe Nero was the only other company to float on the list, raising Pounds 9m.

Neil Austin, KPMG’s head of new issues, was driven to say: ‘The IPO market is dead. This is the lowest level of activity we have seen for over a decade and there is no evidence of a pick up.’

The dramatic collapse in activity was attributed to the significant fall in stock markets around the world.

The continuing uncertainty has led to a paralysis in the flow of equity issues. Austin warned: ‘No-one is yet able to call the bottom of the slump and restore the degree of comfort needed to encourage institutions to get their cheque books out.’

The picture was similar across Europe, with the number of IPOs at very low levels in the key markets of Germany, France and Italy.

During the first three months of this year, only Euro 9bn was raided across Europe, a third of the amount raised at the same time in 2000.

At the other end of the scale the Centre for Management Buy-out Research showed that the value of MBO deals was holding up though the volume had dropped.CMBOR, which is backed by Barclays Private Equity and Deloitte & Touche, recorded Pounds 5.7bn of deals in the first three months of 2001, the third largest figure ever.

Deals included the Pounds 1.6bn Whitbread pubs buy-out.

Tom Lamb of Barclays Private Equity said: ‘The fall in the stock market is producing a further surge of public to private activity as pricing become more attractive.’

Deloitte & Touche corporate finance partner Chris Ward was bullish about the prospects for the market: ‘Despite the stock market uncertainty and the reported fall in general M&A activity there have already been ten £100m plus private equity deals in 2001. Against the backdrop of the market adjusting to new price levels we expect buy-outs to dominate M&A activity for some time.’The collapse in the M&A market has left many City investment banks in a depressed state.

According to KPMG, cross border M&A activity dropped by a third in the last quarter of 2000 and this trend has accelerated in 2001.

John Griffith-Jones, head of corporate finance at KPMG, said: ‘This slowdown is partially attributed to the absence of “mega” deals but, more worryingly for the City as a whole, it is also due to a 25% drop in the volume of transactions in the UK.’

But the malaise was not confined to the mega-deals sector.

KPMG said that the value of mid-market deals, those under $1bn had dropped by a ‘painful’ 41% from the same point last year.

This was seen as a worrying trend for the accountancy firms as the large investment banks continued their march into the mid-market arena, an area the Big Five firms in particular are keen to dominate.

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