LONDON (Reuters) – Fees earned by bankers in Europe’s equity capital markets reached a two-year high of nearly $2 billion in the first half of 2020 as companies raced to raise funds in secondary transactions to ride out the coronavirus crisis.
While initial public offerings (IPOs) almost ground to a standstill, European equity capital market (ECM) activity rose to $81 billion, it highest first half level in three years.
“In the early phase of the lockdown we have seen increased activity in recaps and related primary issuance across Europe, but mostly focused in the UK,” Samuel Losada, head of EMEA Equity Capital Markets at Bank of America, said.
European IPOs raised just $5.6 billion in the first half of 2020, the worst since 2012, Refinitiv data shows and at $4.4 billion, the proceeds from a total of just five IPOs in the second quarter were down 65% from a year ago.
Globally ECM bankers made $11.7 billion in fees, the highest pot for a first half year since 2015.
(Graphic: Global ECM fees at highest in half a decade, here)
After the IPO of coffee maker JDE Peet’s JDEP.AS, whose stock is trading 15% above listing price, banking sources say Polish online auction site Allegro and Vodafone’s European towers unit could also list this year.
“As we now approach the summer, IPO activity is picking up and we expect a meaningful set of IPOs to come to market in September,” Losada said.
But there are only a few big companies operating in several countries and active in resilient industries which have a realistic prospect of pulling off a float like JDE Peet’s.
“You just have to look at the sectors trading at premium valuations, which are mostly up year-to-date such as tech, online retailers, pharma … to see what investors are interested in,” Josef Ritter, global co-head of Equity Capital Markets at Deutsche Bank, said.
And more companies are expected to turn to capital markets to raise money to support their recovery from the pandemic.
Britain’s Compass Group (CPG.L) which serves daily meals to hundreds of thousands of schoolkids, office workers and prisoners, showed that the market is receptive to such trades, raising a hefty 2 billion pounds ($2.5 billion).
Meanwhile, the IPO market will emerge from the pandemic with lasting changes, bankers and lawyers say.
Virtual roadshows are likely to replace the two-week carousel of five-star hotels around the world and analysts can take calls from hundreds of investors at a time on ever- improving technology platforms.
(Graphic: Share sales save the day as IPO volumes plunge, here)
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