After a barren year for listings in 2009, is the IPO market set to kick back into life?

Will they, won't they? And if they do, when? Initial public offerings (IPOs), still the bellwether for market confidence, have been all but absent in 2009. As such, for many lawyers, the real test of whether recovering markets can deliver deals will be if 2010 can make good on the predictions that the IPO market will reopen for business.

Certainly it can't get much worse than this year. In 2008 London's main market raised £6bn through 32 offerings – in contrast, this year has seen just three floats in the UK raising £416m (Rushydro, Downing Protected Opps and Blackrock Hedge Selector). Back in the boom year of 2007, the main market raised £19bn. The Alternative Investment Market (AIM) has fared little better, reporting five new IPOs this year compared to 38 in 2008, although there are a few more offerings slated for November and December.

Luckily for equity capital markets (ECM) lawyers, the flood of rights issues in 2009 as companies moved to shore up their balance sheets has done much to fill the gap. As one City-based ECM partner sheepishly admits: "We've been having a marvellous time." But such work can't last forever, and it will need the return of the public float next year to avoid a sharp downturn. The banks are doing their bit, talking up deals and pointing to markets where there have been high-profile listings in the US, Asia and Brazil.

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). The hope will be that the first half of 2010 will see the public float return to Western Europe.

Anecdotal evidence suggests that there are a large number of potential IPO candidates in early stage talks with some deals underway, meaning the earliest entrances onto the market will come in the second quarter of 2010 – arch optimists suggest the first quarter, but that may be too ambitious. Despite the generally accepted view that we are now experiencing a period of stability, any optimism is quickly delivered with a caveat, with much talk of a double-dip recession. Even deals that could make it to market are expected to be for companies with strong profit stories in non-cyclical sectors. Whether the private equity firms hoping to raise capital in 2010 have companies that fit this bill is open to debate.

AIM may ironically prove to be one of the most active sectors. Given that it was one of the first markets to suffer – well before the credit crunch took hold in the summer of 2007 – there should be a major backlog of companies hoping to list. Sentiment is also widely reported to be improving in the sector. But the bottom line is, aside from avoiding another crunch-style shock, for the markets to fully open up, a substantial, high-profile IPO is needed to pave the way.

As one City partner warns: "People should be aware that the IPO market in its incipient stage is pretty vulnerable and if there is a significant shock to the equity markets at some point between now and Q1, then there is a risk it could all melt away."