Belfast Telegraph

Flotations are making a comeback, so get in fast

By David Prosser

Time for a revival of the IPO market? The City starved of its beloved fees, is desperately hoping for signs of green shoots, but every time they seem to be peeping through the hard earth they get choked off by another frost.

The freeze isn't total. More regular floats have been successful only when companies with good growth stories have been sold cheaply.

I highlighted in this column earlier this week the way British institutions appear only too willing to sell the family silver for a song. Predators know that if they can secure a board recommendation for their takeover bids, then shareholders will likely cave in. Half the time, they don't even need that.

Fund managers have, though, at least got wise on the other side of the equation. Investment banks used to operate like Avon ladies; they'd knock on the doors of their regulars and know they'd get a sale for their private equity clients, even if some of their wares were a bit, well, pricey. Their fund manager mates could be relied upon to see them right.

No longer. Those same fund managers have got all discerning. They've become just a tad huffy about being take for a ride by their richly-remunerated colleagues in private equity.

The game that was played in the days before the financial crisis showed the fund managers who look after our money in an incredibly poor light. Private equity firms took companies off the stock market on the cheap, loaded them up with debt and sold them back to the same people at vast profits to themselves. One positive consequence of the financial and economic turmoil of recent years is that this little game is no longer being played.

Which leaves the private equity players in a bit of quandary. There's only so long you can play pass the parcel by selling your assets to other private equity firms (and buying theirs off them). Trade buyers sometimes can be found, but not easily given how skittish they are over the economy.

Which leads back to the stock market. The private equity firms will have to come back, perhaps sooner than people think.

Floatations are coming back and prices will be keen.

Savvy investors should get in at the beginning.

Belfast Telegraph