In this month’s Newsviews M&A’s Paul Driscoll and Morag Dickson report on current issues inlcluding new regulations affecting AIM nomads and the newly launched PLUS trading platform.

Nabarro censured

AIM nominated adviser Nabarro Wells has been fined £250,000 by the London Stock Exchange and publicly censured for falling foul of the new rules that govern nominated advisers on the market. The firm was brought to book for failing to conduct the appropriate checks before bringing a company to AIM, with the LSE finding “material problems” with level of due diligence conducted by Nabarro, and with the advice it issued with regard to its client’s admission documents.

This news coincided with the revelation that the number of nominated advisers active on London’s junior market had fallen, prompting speculation in certain quarters that the Stock Exchange was finally beginning to “weed out” certain market operators it deemed to be sailing to close to the regulatory wind. However, the real reason for the drop in the number of nomads could be slightly more prosaic. As Steve Douglas, at broking and advisory firm Arden Partners points out, there has been a good deal of merger activity amongst AIM advisers (Bridgewell was bought by Landsbanki, Robson Rhodes merged with Grant Thornton), while certain firms have ceased to maintain their nomad status, including Ernst & Young and WestLB.

However, Douglas nevertheless found time to praise the new nomad rules that were imposed this year saying: “The regulations simply formalise existing AIM practices and the responsibilities the vast majority of nomads adhere to. “The changes have actually helped us [nomads] operate as they provide protection from any dispute, for example, after due diligence is carried out during an IPO. We can now prove that we have adhered to the rules, which simply requires some box ticking.”

The Stock Exchange refused to be drawn on the issue of whether it had been weeding out irregular operators, with its spokesperson Patrick Humfris telling M&A: “Three new nomads recently joined AIM. We believe the regulations are positive.”

Trading activity in PLUS

PLUS Markets’ trading activity figures for September saw an overall increase on the same period last year. Bargains were up 11 per cent at more than 52,000, trade value increased 13 per cent at approximately £354 million, and the number of shares traded rose by 10 per cent at some 467 million. In the year-to-date, approximately 592,000 trades, worth more than £3 billion and representing some 5.7 billion shares, have taken place on PLUS. Last year, over half a million trades, also worth a total of nearly £3 billion and representing more than 5.8 billion shares, took place on PLUS. If trading continues in this vein, it will be a year to remember for the market.

PLUS celebrates new platform

PLUS Markets Group is fast becoming a competitive stock exchange in London for trading and listing UK and European securities under the new Markets in Financial Instruments Directive (MiFID) regime. In the week commencing 5 November, PLUS transferred its trading and market surveillance operations to a new £6.7 million trading platform being provided by OMX. PLUS now offers trading in more than 7,500 securities, including UK main market listed stocks including the FTSE 100, European securities, UK investment trusts, 70 AIM stocks, and more than 200 PLUS-quoted shares. The move allows investment firms to meet all their execution, reporting and transparency needs under MiFID via the PLUS Markets’ on-and-off exchange quote-driven services.
Looking ahead, PLUS expects the FSA review of certain AIM rules in early 2008 to enable the company to dual-trade all 1650 AIM stocks, giving it full UK stock coverage.

Banks fight to retain MiFID specialists

London banks are launching a counter-offer frenzy to retain their Markets in Financial Instruments Directive (MiFID) specialists in the face of intense poaching from less-prepared second tier banks and other European financial centres, according to international recruitment consultancy GRS. GRS also reported that 50 per cent of MiFID specialists searching for new roles are receiving counter offers, suggesting ill-equipped financial centres in Europe are poaching talent from London. Greg McHugh, head of GRS Munich, said: “MiFID compliance in operational risk in Germany is lagging particularly – it is probably 12 months behind London. The next six months will see an unprecedented level of international recruitment within the MiFID talent pool. We think London will lose as many as 500 qualified professionals over the next six months.”

MiFID was implemented on 1 November to introduce a single market and regulatory regime for investment services across the 30 member states of the European Economic Area. Its aims to: protect investors by making markets deeper, more competitive and more robust against fraud and abuse; to respond to changes and innovations which have occurred in securities markets; and to complete the process of creating a single EU market for investment services.

PE: six of one, half a dozen of the other

The value of European private equity transactions fell 29 per cent to €44 billion (£30.8 billion) following a significant reduction in the number of large buy-outs, according to preliminary figures released in the Q3 2007 Unquote Barometer. The slowdown in big-ticket deals was not unexpected due to the domino effect of market turmoil on the business community. But it’s not all bad news. Year-to-date figures for 2007 remain significantly higher than 2006 with all private equity transactions up 29 per cent at €160 billion (£111.8 billion) and buy-outs up by 32 per cent at €152 billion (£106.2 billion). Mid-market buy-outs, which account for more than 60 per cent of all buy-outs, performed strongly across the UK and Europe with the value and volume of
deals increasing.

Unquote Barometer is published by Incisive Media and sponsored by private
equity house Candover.

Marek Gumienny, managing director of Candover, said: “These latest figures show, as expected, a near 30 per cent decline in the headline value of buy-outs as the credit crunch began to hit the big deals. However, underneath that, it is clear that in spite of the problems in the debt markets, private equity – and the banking community – have not closed for business. There are still deals to be done, but the dynamics of deal-making have changed. Focusing on the fundamentals – can businesses repay their debt in three, five or seven years? – is back in fashion.”

News in brief:

Fall in UK IPOs

The number of IPOs on London’s markets fell 75 per cent in the third quarter, according to research from Ernst & Young, with the trend expected to continue for the rest of the year. Head of UK offerings at the accountancy firm, David Wilkinson, believes, “Uncertainty in the US sub-prime issue” has caused the drop
in listings.

In its Autumn Forecast the Ernst & Young ITEM Club has estimated a spending and investment squeeze across all sectors. Consequently UK economic growth in 2007 will drop from its expected 3.1 per cent to an estimated 2.1 per cent next year.

Whilst in Spain…

More than double the amount has been raised this year from IPOs in Spain compared to the €2.7 billion (£1.9 billion) raised in the whole of last year.
The £2.2 billion IPO of Criteria Caixa, the investment arm of savings bank La Caixa, lifted the amount raised to £3.38 billion and signalled the sixth listing this year. The figure dwarfs the record £1.89 billion raised last year when ten companies listed, according to data provider Dealogic.

Happy Monday UK

Forecasters jumped to predict a re-run of the infamous Black Monday in 1987 – which didn’t occur. Indeed, the overall picture is far from bleak argues accountant PKF. Research from the firm highlights the increase in UK quarterly deal values from £15 billion at the start of 2004, to £62.9 billion in Q2 this year. During the same period the average value of a UK M&A deal rose from £85 million to £143 million.