A&O triumphs in 2015 IPO league tables as Linklaters dips

London’s IPO market was on top form last year, as 55 new companies debuted on the city’s Stock Exchange. And it’s Gowling WLG that has advised on more main market IPOs than any other firm, while Allen & Overy (A&O) dominated in terms of total market value.

According to research conducted by The Lawyer, the market has picked up significantly since 2013. Just 20 companies entered the UK and international main market in that year, compared to 49 entrants making their debut between the start of 2014 to the end of August. These 49 companies had a high combined market cap of £29.5bn, while last year’s 55 flotations totalled £24.6bn in terms of total market value.

Legacy Wragge Lawrence Graham & Co, now Gowling WLG, advised on more main market IPOs than any other firm last year, winning six sponsor-side mandates for Vertu Capital, Gabelli Value and Cleantech Building Materials, as well as Aew UK Reit, Project Finance Investments, and Upland Resources.

However, the combined market value of those listings, £316m, was significantly lower compared to work carried out by other firms. A&O worked on four issuer-side mandates worth a combined £7.46bn in 2015, accounting for nearly a third of the market value of all IPOs announced last year. The magic circle firm had a bumper October and November, working on the listings of new clients Worldpay, Ibstock, Gym Group and McCarthy & Stone, with prospectuses published for all four within a one-month timeframe.

“I accept we’re not going to get the big value deals of the magic circle,” says Gowling WLG investment funds head Nick Heather. “But we did IPO work for a number of small and medium-sized businesses last year, having had referrals from investment banks and brokers. We’re consistently winning pitches against the larger US and national firms and we make a fairly compelling argument.”

Issuer-side mandates: by value

Issuer-side mandates: by volume

Heather says one of Gowling WLG’s “compelling arguments” is its ability to find US advice quickly, namely through its strong links with Goodwin Procter. The US firms pose a threat to the UK ones that are not kitted out to deal with US-listed securities issues and these matters continue to play an important part in the larger IPOs.

“We worked with Goodwin Procter on two IPOs last year, acting together on the side of the banks for VPC Speciality Lending Investment and Ranger Direct Lending Fund,” explains Heather. “We have a good relationship with Goodwin Procter both in Boston and London and it shows we don’t need an office in the US to do the work.”

The American connection

Data reveals a number of other corporate relationships exist between national UK and US firms, as the ability to handle US securities work continues to be a vital selling point in pitches. Both Slaughter and May and Pinsent Masons advised on two main market IPOs last year, with the pair having to look elsewhere for specialist US help.

Paul Weiss Rifkind Wharton & Garrison partner Mark Bergman assisted Slaughters in London on the listings of both Shawbrook Group and Non-Standard Finance, while Pinsent Masons strengthened its ties with Proskauer Rose. London-based Proskauer partner and former Citi lawyer Peter Castellon worked with Pinsents on the IPO of Cairn Homes over the summer, also acting for old employer Citi and Jefferies as the underwriters on Georgia Healthcare Group’s listing.

But it is not just the specialist securities work that has seen the US firms playing more of a role in IPO mandates. When The Lawyer carried out research in 2014, not one US firm made it onto the top list of issuer-side mandates. However, last year, Weil Gotshal & Manges and Simpson Thacher & Bartlett both scored major roles on some of 2015’s largest flotations, as a result of their ties to private equity clients.

“Private equity firms are exiting from their investments and an IPO is a way to do that,” says Weil Gotshal partner Peter King. “Many private equity firms announced investments in the latter half of the 2000s and these cycles of between five to 10 years are now coming to an end. Companies are going through dual-track processes, as these assets come up for sale or are floated.”

While A&O won the lead role for Worldpay on its flotation, company owners Advent International and Bain Capital also turned to Weil Gotshal & Manges, who had advised on the private equity house’s original investment back in 2010. The Advent International work then continued to thrive for Weil Gotshal over 2015, as partner Peter King also led on Equiniti’s listing, in which A&O moved over to advise the company’s underwriters instead.

“In these deals, we’ve acted for the private equity firm that’s been selling, as well as the issuer,” adds King. “Usually the interests of the private equity firm and the issuer are very closely aligned to each other. For these transactions, we’ve put people on the team that have dealt with the investment side of the original acquisition, as well as people with UK listing expertise.”

One partner at a US firm acknowledges the US firms “probably do have those private equity connections”, with Weil Gotshal having the Advent relationship, and Simpson Thacher able to act for Auto Trader Group through its links with Apax Partners. However, these private equity exits are also presenting opportunities to the UK firms acting on other side, giving them the opportunity to impress future clients.

Bank-side mandates: by value

Bank-side mandates: by volume

One of Freshfields Bruckhaus Deringer’s big bank-side mandates in 2015 was Worldpay’s flotation in October, in which partners Mark Austin and Julian Makin worked with a group of underwriters led by Goldman Sachs. But following on from the flotation, the firm has since gone on to act for new client Worldpay on its inaugural bond offering last November, led by new partner and co-head of European levered finance Ward McKimm.

“It’s important to be in the flow of bank work, as the firm has strong relationships with the financial institutions,” says Austin. “The issuer side is also obviously important and it’s strategically important because it generates new clients for the firm.”

Freshfields continues to put on a strong show in the equity capital markets, working on four issuer-side mandates in 2015 as well as six for the banks. The firm’s six underwriting roles equalled Gowling WLG’s number of bank-side mandates, although the value of Gowling WLG’s IPOs again totalled a smaller £1.35bn compared to the magic circle firm’s £3.16bn.

Freshfields’ and Gowling’s success on the bank-side, coupled with Clifford Chance’s five transactions worth £4.5bn, came as Linklaters dropped out of the table altogether, having won seven underwriting roles over 2014.

However, 2016 has so far been a much different story, with Linklaters winning the top roles on some of the only IPOs announced since the start of the year. Partners from a number of firms have described the IPO climate at present as “volatile” and “choppy”, due to the macroeconomic issues arising from Brexit and China, causing “paralysis in the secondary IPO market.” Nevertheless, both Countryside Properties and CMC Markets turned to Linklaters as they floated in January, with the pair unlikely to have pulled out having prepared for them so far in advance.

“There are headwinds at the moment and things such as falling oil prices and Brexit referendums are not helping,” adds Austin. “People are having to be keener on pricing than they were before to get issues away and many companies will now wait until Q4 and the result of the referendum is known. There’s been a healthy pipeline of new jobs and pitch requests going round but these are for IPOs in Q4 and the first quarter or half of next year.”

With the difficult market, partners are predicting fewer IPOs over the coming year, as investors nervously think about buying new assets and companies look to postpone listings. While UK and US firms alike made the most of the uptick last year, it could well be short-lived.