UK IPO market expected to return to buoyancy in 2015, BDO survey says
The market for UK initial public offers is expected to regain its buoyancy in 2015 after several flotations were pulled towards the end of 2014 and despite the looming general election and oil prices undermining the investor confidence.
Due to reasons such as a lack of bank funding, institutional investors have strong expectations that IPO numbers on both London's main market and Alternative Investment Market (AIM) will increase from the level last year or at least remain the same, advisory firm BDO found in a survey of 116 global money management firms.
The survey, which questioned institutional investment firms with a combined $10trn under management investing in UK equities, found 76% of respondents expected the numbers of IPOs on AIM to increase or at least remain unchanged and 77% expected the same for the number of IPOs on London's official list.
London IPOs hit a seven-year high last year, with 58 companies joining the main market to raise £14.1bn, while 80 companies raised £2.8bn from listing on AIM but several high-profile floats were delayed or scrapped due to bouts of market volatility or a waning investor interest, including Fat Face and RAC.
A trio of notable IPOs have already been mooted in 2015, with John Laing planning a £1bn comeback and HSS Hire also planning a London listing for the first quarter, although Trainline's £500m flotation was usurped by a bid by private equity firm KKR.
“Despite all the uncertainty, global investors continue to rank the UK as a key place to do business," said BDO capital markets partner Chris Searle.
"This positive sentiment is particularly welcome given the number of floats that failed to make it to the market last year.”
A lack of UK bank funding was identified by 71% as the overwhelming reason why companies were having to seek a listing in order to raise new funds.
For the coming year, UK has been ranked fifth in the world in terms of attractiveness for equity investors, with 33% of investors citing it as an attractive country for equity investment, only marginally behind China at 34% and Germany and Japan joint second at 37%, with the US cited by 48%.
The sectors seen as most likely to be looking to raise money on capital markets are technology, which was singled out by 51% as particularly attractive for investors over the next 12 months, followed by consumer goods, financials and healthcare.
In terms of company size, Searle noted a gap in attitudes towards investing in smaller versus larger companies.
A full 67% of institutional money managers selected large companies of over £300m market cap as looking more attractive for investors in the coming 12 months, with only 28% preferring smaller companies.