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Dampened market spirit, diminished deal activity

There were two AIM IPOs in Q3 2019: Uniphar the Irish healthcare firm (a Dublin/London dual-listing) and Brickability, the building materials supplier. Based on announcements they raised £121 million and £57 million of new money respectively, and the combined market capitalisation of the two transactions was £417 million - £267 of which was attributable to Uniphar. The number of flotations was down from Q3 2018 which reported six AIM IPOs and collectively raised only £306 million.

On the other hand, the Main Market saw four IPOs in Q3 2019 which raised £744 million of combined new money. Telecommunications firm Airtel Africa attracted the lion’s share of this number with a staggering £595m, followed by JP Morgan Global Core Real Assets, the Guernsey infrastructure fund which raised £149 million. By way of a comparison, the Q3 2018 figures were much higher with eleven IPOs raising a total of £1.35 billion of new money.

In other news, following the changes to AIM Rule 26 in 2018, whereby companies were instructed to publicly report on their compliance with a recognised governance code, it is clear that the Quoted Company Alliance Code has become the code of choice for AIM companies. 70 of the AIM 100 initially chose to adopt it, followed by 25 companies which have since taken up the UK code and the remaining 5 opting for the AIC and Guernsey Codes.

M&A trends

Outward UK M&A in Q2 2019 came in at £1.5 billion, a sharp fall from £6.1 billion that was seen in Q1 2019 and the £5 billion seen in Q3 2018. This could be attributed to the uncertain political environment, however, we believe that investors have become accustomed to the sluggish rate of development on Brexit. Looking at EMEA by sector activity in six month periods, telecommunications, media and technology (TMT) saw the most deal flow with over 90 transactions recorded in H1 2019 in the UK and Ireland, followed by 88 deals in the Italian consumer sector.

The value of foreign firms acquiring UK business was £18.4 billion in Q2 2019 - a significant increase from the £7 billion logged in Q2 2018. We have noted several US firms making strategic bids for UK assets mainly due to technology and expansion. European public-to-private activity marked an all-time high since the financial crisis of £16.5 billion, with some of the more notable transactions being the takeovers of Inmarsat and KCOM. Given the fact the private equity dry powder is in the region of £1.6 trillion, we would expect to see deal activity continue at a steady pace in this arena.

With the proposed departure from the European Union rapidly approaching, corporate finance activity may continue at the subdued pace we saw in 2019. Now that Boris Johnson has agreed a deal with the EU, the nation will be on tenterhooks to see if it gains the necessary votes to pass through the Commons, however, there is some scepticism due to the DUP categorically opposing it. The more optimistic analysts note that there may be a light at the end of the tunnel, as capital may start to pour in once the UK’s position is clear.

Jordan Anderson
Manager, IPO execution
T: 0207 954 9776
jordan.anderson@linkgroup.co.uk