Big-ticket international IPOs open door for UK market comeback as banks generate interest in listings

Equity capital markets (ECM) partners are preparing for a wave of main market initial public offerings (IPOs) after seeing listings all but dry up in 2009.

So far this calendar year there have been just three IPOs on the main market of the London Stock Exchange raising £416m, compared with 32 IPOs raising £6bn in 2008. London's Alternative Investment Market has also seen a dearth of activity, with just five IPOs in 2009 compared with 38 during 2008.

The drop in new listings work has left ECM partners concentrating on a slew of rights issues as companies rushed to shore up their balance sheets, with Yell, Ladbrokes and JJB among those carrying out rights issues.

However, internationally, the IPO market has already begun to pick up in recent months and London partners are optimistic that 2010 could see a similar increase in activity in London.

Hong Kong in particular has seen an increase in interest, with UK firms such as Slaughter and May, Allen & Overy (A&O) and Freshfields Bruckhaus Deringer among those benefiting from IPOs, including China's largest pharmaceutical company, Sinopharm, which raised HK$8.73bn (£684m) and Metallurgical Corp, which raised HK$18.2bn (£1.4bn).

Ashurst corporate partner Nicholas Holmes said: "A large number of potential IPO candidates are under early-stage discussion – there is a lot of bank pitching going on and a number of deals are under way."

A&O London corporate head Andrew Ballheimer added: "Banks are generating a lot of interest in IPOs and this should result in some deals being completed in the first quarter of 2010, but it will need a high-profile IPO to open the markets up."

However, Lovells corporate partner Richard Brown warned: "The key risk currently is that the markets are not open. The long lead time on the deals means that the small window of opportunity to complete the float is easily missed."