European ECM Roundtable 2012: Part 3 - IFR ECM Survey
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The results of IFR’s European ECM survey, conducted in the autumn, offered a relatively positive, if cautious, view of capital markets activity in the first half of 2013. When the survey was launched, EMEA IPOs had garnered just US$5.9bn in proceeds. Towards the end of November, that had risen to US$13.5bn thanks to Telefonica Deutschland and Direct Line.
But survey respondents are veering towards those totals looking a little better in the first half of 2013: while 55% reckon EMEA IPO proceeds during that period will be between US$5bn and US$10bn, more than a third is optimistic that the first half will generate deals worthUS$10bn and US$20bn. There was similar feedback for ECM as a whole: against US$52bn of proceeds when the survey launched, 62% of respondents ticked the US$50bn to US$75bn box, but 28% went for the glass distinctly half-full option of US$75bn to US$100bn.
Assuming a similar deal velocity in the second half, that infers a level of optimism for the whole year that was lacking for most of 2012. The survey returns were consistent with the relatively upbeat mood of delegates and speakers at IFR’s ECM conference in October.
Geographic provenance of ECM business firmly if predictably was focused on Germany at the top of the list followed by the UK, although of the range of options offered, EEMEA was a somewhat surprising and very clear third choice. Sector-wise, financials came top of the list, followed by energy and power, industrials, and metals and mining.
On other questions, respondents were fairly evenly balanced around the standard IPO timeline (only 56% in favour of maintaining the 2+2 week process), but there was overwhelming support for generating cornerstones in IPOs, while 70% of respondents think the optimal number of IPO global co-ordinators is just two. On the issue of listings, two-thirds think a domestic listing the way to go.
If optimism was definitely emerging around deal flow, respondents are less confident that headcount on ECM desks will be maintained. While 23% think it will be remain as it is, the same number think it will marginally shrink. Yet of the 54% who think jobs will go; a full third think the cuts will be severe – above 10%. This issue was expressed at the conference, where ECM bankers were concerned that more deals with fewer heads would inevitably mean poorer overall service. ECM bankers also dismissed the notion that investment banking coverage would be able to handle ECM.
On a related note, one of the questions asked if we would see more deals along the lines of Unicredit or Credit Agricole with Kepler Capital Markets. In those arrangements, Kepler will handle equity distribution and research for CA-CIB and Unicredit, but the banks will maintain their origination and syndication desks.
While such options lessen the costs of maintaining product coverage, the reality is that the end result is bound to be more disjointed than a fully in-house set-up, and loss of overall management control of the process is less than ideal. Survey respondents clearly believe there is more to come: 45% said they expect similar deals to be struck in 2013.