Beginner's luck

At the same time, UK-registered admissions to London’s junior market appear to be on course to match 2008’s all-inclusive total of 87, while the £2.26bn generated through new admissions on the Alternative Investment Market (Aim) is more than double the next strongest return in the intervening period. Aim continues to benefit, both in its primary and secondary markets, from the Treasury’s decision in August 2013 to extend individual savings account (Isa) tax breaks to its constituents. Meanwhile, global listing volumes are up by over a third on 2013, with the US IPO market hitting a 14-year high in aggregate proceeds, according to analysts at PwC. The stellar US showing was thanks in part to a massive $25bn offering by China's Amazon’s equivalent - the Alibaba Group (US:BABA).

Private equity admissions

A contentious element, not only in the UK, but across global equity markets, has been the increased prevalence of private equity sponsors. Recent analysis from accounting heavyweight EY shows that proceeds generated through private equity-backed IPOs were up 86 per cent on last year and accounted for nearly half of global IPOs by value. Private equity sponsors have attracted criticism for utilising public admissions to hive off (occasionally leveraged) assets bought at the apex of the economic cycle. There’s obviously nothing untoward from a regulatory perspective, but the practice doesn’t always work in the best interests of minority shareholders. Private equity firms made merry when sentiment was buoyant in global equity markets, but it will be interesting to see if they manage to muscle in on the raft of IPOs that have been postponed as risk appetite has waned.

Pulled deals mount on volatility fears

There has been no shortage on that front, both here and abroad. High-street fashion brand Fat Face pulled its May IPO citing weakening trading conditions, while British Car Auctions (proprietor of ‘WeBuyAnyCar.com’) put the kibosh on its £1.2bn listing due to heightened market volatility. In October, challenger bank Aldermore cancelled a planned £890m admission as equity valuations started to click into reverse. Admittedly, Sir Richard Branson's Virgin Money (VM.) did eventually make its way on to the LSE, but at the lower end of valuations, after the original plan to float was put on hold until sufficient investors had come forward. So, aside from generally favourable news on the listing front through 2014, not everything has been plain sailing.

With increased uncertainties in equity markets, coupled with expectations of lower economic growth, the outlook for global IPO activity probably isn’t as favourable as it was 12 months ago. But no one is predicting a pronounced fall-away in activity over 2015. In the case of the UK, equity markets could be in for a flurry of listing activity in the run-up to May’s general election, particularly if - as many suspect - it will usher in a period of political instability.

Non-bank finance a probable growth area

Looking to next year, one area with potential for real expansion is non-bank financial services, specifically companies that are stepping in to fill the role vacated by traditional banks in the lending market. One such operator, LendingClub (US:LC), has just listed across the Atlantic via a $5.4bn IPO. The company is attempting to become the default setting for online finance, following the digital example provided by the likes of Google, which shows that if you build an effective platform, other businesses in the market will rush to market their services through it. LendingClub will directly connect borrowers and investors through a low-cost online platform designed to partially negate the difference between low return on deposits and high interest rates for consumer credit. We might reasonably expect similar operations to debut on the LSE in time. Policymakers and regulators have been calling for more competition in UK high-street lending, but banks are being saddled with ever more onerous capital provisions. Perhaps the time has arrived for non-bank finance.

A belated resurgence in M&A

The resurgence of listing activity on the LSE through last year was accompanied by a commensurate rise in the number of takeovers. Aggregate deal values in the first three quarters of the year have been substantially in advance of the same period in 2013, while average deal sizes are at their highest level for many years. Admittedly, dealmaking has been largely absent in many of the years following the financial crisis, although this inactivity has been somewhat baffling when you consider the high level of capital liquidity on FTSE 350 balance sheets.

Nevertheless, research from UHY Hacker Young highlights a recent step-up in activity - and a pronounced one at that. The analysis shows that M&A on London's Aim has recorded its strongest quarter in over two years, possibly on the back of more realistic valuations on London’s junior market. The UHY Hacker Young data also reveals that, in the third quarter there were 13 M&A deals involving AIM companies - the highest number since the first quarter of 2012. This compares with five deals in the second quarter of 2014 and six in the third quarter of 2013. In total there have been 36 M&A deals on Aim in the past year.

The findings are given added ballast through a separate report published by BDO. The group's PCPI/PEPI report, which monitors the purchasing patterns of trade and private equity interests, found that trade deals were up by over a third in the quarter to September. At the same time, the volume of private equity acquisitions increased by 35 per cent; its fastest rate of expansion in five years. Cross-border transactions were also far more prevalent than in previous years, with growing activity from Chinese, German and Canadian strategic investors. US M&A increased 38 per cent in the first 10 months of the year, to $1.3 trillion, according to data from Dealogic, this was helped, no doubt, by the desire of some transnational operators to avoid US corporate taxes).

Zoopla, Virgin Money and Pets at home all floated in 2014

Crude oil to lubricate dealmaking

A step-up in M&A activity presents opportunities in the market, but not everyone made it into the winners’ enclosure during 2014. A number of hedge funds were saddled with heavy losses on failed arbitrage positions, as takeover deals worth around $580bn were pulled through the course of the year - the most prominent being the collapse of a proposed $55bn tie-up between UK drugmaker Shire and US rival AbbVie. Indeed, the ratio of failed- to successfully-completed M&As is at a record high.

In coming months, the push towards M&A could intensify if the slump in crude oil prices is prolonged. The slide in crude is adding impetus to existing cost-cutting initiatives within the energy sector. But it could conceivably trigger a spate of mergers, mirroring the consolidation in the run-up to the millennium, which accounted for top-tier industry constituents like Texaco and Mobil.

Winners and losers in 2014