Mark Robinson, Companies Editor – Investors Chronicle
03 September 2019
The chances of the UK leaving the European Union (EU) without a formal trade deal have increased significantly since the appointment of Boris Johnson as Prime Minister and the accompanying purge of the cabinet.
What this means for the wider UK advisory complex is difficult to fathom, partly because so many firms already have subsidiaries stationed abroad. It’s also difficult to assess the extent to which financial services companies will be affected by the removal of rights under the existing ‘passporting’ protocols. These essentially enable firms registered in the European Economic Area (EEA) to do business in any other EEA state without the need for further authorisation from each country.
It’s just one of a host of uncertainties that have been dogging UK business ahead of our departure from the EU. But you’re left with the impression that it’s the lack of clarity over the shape of our future commercial relationship with the EEA, rather than specific issues linked to non-tariff barriers, which have convinced firms to put investment decisions on ice. Corporations can and do adapt to changing trade and regulatory frameworks, but they hate being left in limbo.
The effects of this uncertainty have stretched beyond our shores. Indeed, they’re feeding into concerns over the health of the European economy. Nowhere is this better illustrated than in the reduced appetite for initial public offerings (IPOs) in the first half of 2019. Figures from the Bloomberg Law Review point to 71 IPOs through the period, raising $15.9 billion. That compares to 168 IPOs priced, raising $31.5 billion, in the comparable period in 2018. And – equity valuations notwithstanding - it’s not as if risk appetite was greatly in evidence during the first half of last year. However, it’s worth mentioning that activity picked up appreciably during the second quarter and that the average size of individual admissions was up on the previous year.
A deteriorating IPO market has negative implications across the range of advisers, not least of which, those within the law industry, an obvious mainstay of the listing market. Life, however, goes on. Pinsent Masons moved further ahead of industry peers in the AIM rankings for the quarter. The law firm leads the way from Gowling WLG and CMS. Stephenson Harwood has taken outright second place in the Small-Cap/Fledgling rankings, although they’re still dominated by Dickson Minto, which has double the number of constituents of its nearest competitor. A half-dozen client wins means that Slaughter and May has taken the outright lead in the overall rankings, though Linklaters holds that distinction by dint of its representative market-cap.
With regulatory reform in the air, auditors probably have more to worry about than the parlous state of the IPO market. BDO extended its lead in the AIM rankings through half-a-dozen gains, courtesy of the completed merger with Moore Stephens LLP. PricewaterhouseCoopers (PwC) replicated BDO’s performance, which meant that it not only leads the way by aggregate market-cap but has taken third place by the number of index constituents. PwC did register client gains in the FTSE 250 rankings, including Bodycote and Cineworld Group, which not only increased its advantage over the field but left it as index frontrunner by aggregate market-cap. EY is up into third place in the Basic Materials rankings through a handful of new mandates, including that of Resolute Mining. BDO still leads the way in the sector, though Crowe UK was heading up the rankings after it pulled in two new clients through the period. Mazars and Saffery Champness have made their way on to the Health Care rankings on the back of respective mandates for OKYO Pharma and Yourgene Health.
It was a relatively subdued quarter for the PR consultancies, with few changes in the upper reaches of the AIM rankings, though FTI Consulting improved its number count at the head of proceedings, while Yellow Jersey PR has secured third place. Blytheweigh has taken the lead position in the Basic Materials sector, bringing in Vast Resources, Oriole Resources, European Metals Holdings and Anglo African Oil & Gas. Buchanan has taken third place in the Financials sector, adding Helios Underwriting and Hansa Trust over the quarter.
There was a little more movement in the stockbroking space, though the most of the lead positions were maintained. A marked step-up in the number of Financials constituents pushed Investec Bank into third place in the FTSE 250, though JPMorgan Cazenove still dominates by overall numbers and their representative market worth. JPMorgan Cazenove pulled further ahead in the FTSE 100 top-tier rankings through a solitary mandate through the period. Goldman Sachs International now shares fifth place with Barclays after it was brought in as stockbroker for Rentokil Initial. In overall terms, Investec Bank produced the standout performance through the quarter, shunting the adviser into fourth place by total market numbers. Even though Peel Hunt was awarded several new mandates in Basic Materials through the quarter, its sector count is only half that of sector frontrunner SP Angel. Numis Securities has taken a share of the lead in the Health Care sector after it was handed advisory duties for MaxCyte, Inc. finnCap managed to keep pace with Numis through a new mandate from WideCells Group.
Rankings for the nominated advisers (NOMADs) were largely static through to the beginning of August – at least in relative terms. Numis Securities has drawn level with JPMorgan Cazenove at the head of the Small-Cap/Fledgling rankings and is up into second place by aggregate market-cap. Activity was relatively muted in the FTSE 250 rankings, though numeric declines from the likes of Stifel Nicolaus Europe and Jefferies Hoare Govett resulted in several positional changes in the mid-table standings. Rothschild & Co increased its client count in the FTSE 100 benchmark standings, moving it into a share of third place alongside Morgan Stanley & Co. Lazard & Co is now into outright eighth place on the back of a solitary gain, while Numis Securities was also on the rise in the mid-table positions. The newly amalgamated Consumer Products sector has Numis Securities and Rothschild sharing top billing ahead of Investec Bank. Cenkos Securities has secured a share of second place in the Energy sector alongside SP Angel, though Strand Hanson stretched its lead at the head of proceedings. finnCap now sits atop the Health Care sector following its appointment by Destiny Pharma. It means that the previous joint leaders – Panmure Gordon and Peel Hunt – drop down into a share of second place.