analysis
bids and deals
B
ids and deals are back.At least, that is what many
experts are hoping after the flurry of flotations,
mergers and acquisitions that were announced in
the second half of last year.Vodafone’s $130 billion
(£81 billion) sale toVerizon of its 45% stake in
VerizonWireless was the UK’s second largest ever deal –
Vodafone was also behind the biggest, the £109 billion purchase
of German group Mannesmann in 1999.The
government’s sale of just over half its stake
in the Royal Mail was the biggest
privatisation since the 1980s heyday of
sell-offs, such as British Gas and British
Telecom; while, across the Atlantic,Twitter
became the latest technology giant to go
public in one of the US’s biggest initial
public offerings (IPOs).
The level of investors’ enthusiasm was
just as striking as the size of these deals.
Retail investors in the Royal Mail
privatisation oversubscribed seven times as many shares as were
allotted to them, while institutional investors applied for 20
times more shares than were available; forTwitter, demand was
also well above the number of shares being offered.
Less celebrated companies have also enjoyed successful
debuts, with upmarket estate agents Foxtons and housebuilder
Crest Nicholson among those with well-received IPOs in
2013; while fund manager Aberdeen Asset Management’s
announcement of its purchase of ScottishWidows Investment
Partnership sent its share price soaring.
This is in sharp contrast to the dark days of the financial crisis,
when corporate activity all but dried up. Raffaele Jerusalmi, director
of capital markets at the London Stock Exchange Group, said:‘In the
past five or six years, we have been in a situation where, a few months
after an IPO, the shares were trading below the price at which they
were issued.That was not positive for
investors. Now, however, companies and
investors are feeling more confident about the
future of the economy so they are more
willing to invest in IPOs.’
The recovery in the stock market is
certainly helping: last year was one of the
best for shares since the start of the financial
crisis and the five-year performance record
for shares and investment funds is now
looking very healthy.There is also growing
confidence in the global economy: the US
recovery appears well-established, albeit that growth is still
relatively low; the UK is also showing marked signs of
improvement; and, while the picture in Europe is rather more
mixed, the crisis of confidence in the euro appears to have
receded, at least for the time being.
Even the tapering of the US’s programme of quantitative
easing (QE) programme of market support, which started in
December, is less feared by investors than it was. Indeed, some
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THE INVESTOR
thereturn
of corporate
activity
Vodafone, the Royal Mail andTwitter are just some of the big names
that were involved in major financial deals and flotations in the
second half of 2013, and the trend is set to continue this year
Companies and
investors are confident
about the future so
they are more willing
to invest in IPOs
By Heather Connon
