Floats sink to 11-year low as City falls silent

Com­pa­nies shun mar­ket as Covid pres­sures and ris­ing scru­tiny see firms turn to pri­vate eq­uity ‘wall of cash’

The Daily Telegraph - Business - - Front Page - By Lucy Bur­ton and Michael O’Dwyer

THE num­ber of floats in Lon­don has plunged to an eleven-year low as bat­tered firms shun the stock mar­ket and seek sup­port from pri­vate eq­uity barons to sur­vive the Covid melt­down.

There have been just six ini­tial public of­fer­ings so far this year ac­cord­ing to data provider Refini­tiv, rais­ing £647m – the low­est both by num­ber and value since the fi­nan­cial cri­sis in 2009.

By con­trast, com­pa­nies have raised £27.5bn through 80 Bri­tish pri­vate eq­uity fundrais­ings as they seek an al­ter­na­tive so­lu­tion where there is less public scru­tiny over bosses’ pay and their ac­counts.

Ex­perts said the fig­ures in­di­cate a long-term shift which could mean a gen­er­a­tion of promis­ing busi­nesses never go public, with mil­lions of re­tail in­vestors and work­place pen­sion funds miss­ing out on their growth as a re­sult.

The change will raise fresh ques­tions over the fu­ture of the City as it strug­gles to re­group fol­low­ing Covid and Brexit. Pri­vate eq­uity-run com­pa­nies are more likely to come un­der for­eign con­trol and could be weighed down with a moun­tain of debt by their new own­ers. Alex Ham, the co-head of City bro­ker Nu­mis, said the list­ings mar­ket has all but shut down due to the coro­n­avirus cri­sis al­though in­ter­est is start­ing to re­turn.

But he added: “How­ever, there is clearly a struc­tural trend for com­pa­nies stay­ing pri­vate for longer and in some cases for­ever.

“It’s been ev­i­dent for some time but per­haps be­com­ing in­creas­ingly ap­par­ent in Europe.”

Nick O’Don­nell, a lawyer at Baker McKen­zie, said it is dif­fi­cult for com­pa­nies to en­tice in­vestors with hopes of fu­ture growth given the un­cer­tainty thrown up by the pan­demic and Brexit.

Board­rooms have also been snub­bing merger talks due to the un­cer­tainty, leav­ing bankers fac­ing their qui­etest year for deals since the cri­sis.

Asked about the rise of pri­vate eq­uity, Ja­son Zem­mel, a part­ner at City law firm CMS, said: “I can’t see any rea­son why it’s not go­ing to con­tinue.”

He said the com­bi­na­tion of a “wall of money” built up by pri­vate eq­uity funds keen to find in­vest­ments and a mar­ket where busi­nesses want to avoid red tape means the trend to­wards com­pa­nies seek­ing to use pri­vate money to grow is likely to con­tinue.

Pri­vate eq­uity firms around the world have a record $2.5 tril­lion (£1.9tril­lion) in so-called dry pow­der wait­ing to be in­vested.

Mr Zem­mel said ad­vis­ers are hav­ing a lot of dis­cus­sions about po­ten­tial pri­vate eq­uity in­vest­ments in the fi­nal months of the year.

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