The pressure to tap the market builds but the obstacles look as daunting as ever

Equity capital markets (ECM) lawyers eyeing up another year of uncertainty must be wondering which will win out in 2011: irresistible force or immovable object?

On one hand, you have the building pressure to tap the equity markets from the growing queue of companies that have been put off braving the market for more than two years thanks to tough market conditions. In theory, at some point issuers with solid stories for investors must accept that there will be no quick return to rosy valuations and just get on with it.

Yet on the other hand, the objects blocking any such progress loom as large as ever, with the market continuing to be buffeted by medium-term concerns – sovereign debt in general and the eurozone in particular – and a weak economic outlook lingering over Western economies. Throw in the political turmoil in Egypt and it's easy to see why advisers' hopes were once again dashed last week as Severstal delayed its planned flotation of NordGold – becoming the third sizeable Russian initial public offering (IPO) to be put on ice this year.

It is starting to seem like a replay of 2010, when a stream of much-touted floats either bombed in trading or were pulled altogether. Despite London's reputation as a global listing hub, partners have also noted the steady shift among issuers towards the Asia markets, with Prada's decision last month to take its IPO to Hong Kong – rather than Milan or London – being noted by many City deal professionals.

While the UK capital is widely considered an obvious home for natural resource companies – recently reinforced by the London Stock Exchange tie-up with Canada's TMX – listing in Hong Kong underscores the importance of China and other Asian markets as a major source of demand for commodities.

Given the volatility of the markets, advisers cite a renewed interest in convertible bond structures, which allow high-growth companies to give debt investors an upside in the event that the issuer secures a full IPO down the line.

Allen & Overy ECM chief Daniel Epstein comments: "Pre-IPO converts should remain a realistic option for companies with the right business and credit profile. I think we'll see a continuing trend towards the consideration of such deals, which should benefit the law firms with the strongest equity-linked franchises."

Given the relative dearth of activity, there is little surprise that a very select band of advisers are dominating what work is on hand, with Linklaters continuing to cast a long shadow. The continuing popularity for European deals to include a US placement is also playing to the hand of global firms, among them Clifford Chance, Freshfields Bruckhaus Deringer, Skadden Arps Slate Meagher & Flom and Cleary Gottlieb Steen & Hamilton.

But one partner comments: "While it is primarily the Skaddens and Linklaters of this world that are servicing the underwriters on such deals, pricing tension remains enormous. This has allowed the likes of White & Case and Baker & McKenzie to muscle in."

The level of price competition is a reminder that, while conditions have improved against the lows of 2009, the going remains extremely challenging. Linklaters co-head of equities Jason Manketo comments: "The recent events in Egypt are likely to contribute to continued volatility in the broader emerging equity markets generally, although our overall sentiment, as well as that of our issuer and banking clients, continues to remain positive for IPO opportunities in 2011." For the moment, it looks like the immovable object still just about has the edge.