In recent weeks London has seen three cancelled public offerings and much commentary surrounding the future of the IPO in London.
Some analysts have focused on this recent spate of cancellations and used it as evidence to purport that the London market is suffering - see, for example, commentary in a recent London Stock Exchange report which says that "more IPOs are 'pulled' here than elsewhere, and IPOs perform worse in London over the long term than in other centres".
Emerging markets are challenging the traditional financial hegemony that has been enjoyed by the West for well over a century and, it appears to some commentators, are becoming the destinations of choice to list international companies.
There is currently, it is claimed, a boom in Eastern financial centres, with the Global Financial Centres Index now ranking Hong Kong, Singapore and Tokyo as the third, fourth and fifth in the financial centres rankings respectively.
But are these emerging markets now the de facto choice for IPO's? According to a recent London Stock Exchange (LSE) report, the Exchange itself is still the world's most 'international' with almost 3,000 companies from over 110 countries listed and traded on its markets.
If we step back from the microcosm of the last couple of months and look at the broader picture for some perspective, London looks pretty healthy. As the LSE points out, "in the first 9 months of 2011, 67 IPOs listed in London, more than any other major exchange, raising £12.8 billion. Over the last four years, the London Stock Exchange has had the lowest rate of withdrawn IPOs compared to its major competitors. And since the financial crisis, London has had the largest percentage of IPOs trading above their offer price compared to NYSE and HKEx. In addition, IPOs in London are priced within range more consistently than those trading on either NYSE or HKEx."
Is the decline in IPOs a local or global trend?
Globally, the number of public companies has fallen dramatically over the past decade. The average number of IPO's in America has, according to figures published by E&Y, declined from an average of 311 a year in 1980-2000 to 99 a year in 2001-11.
And it is not just historical markets that are threatened by possible decline - a number of high profile Hong Kong listings have been cancelled recently. It would seem that the likes of companies such as Facebook going public will do little to offset the long-term decline.
While in the past, 'going public' was the ultimate goal of most companies and their owners, it is now perfectly respectable to 'go private'. Further, the regulatory hurdles imposed on public companies and their institutional investors, the rise in shareholder activism and the spotlight on Board incentives and motivations have dampened enthusiasm for the public equity markets.
In the last decade, institutional investors have tended to favour the certainty of bond markets to deliver the returns required to match their long-term liabilities and the recent volatility of the equity markets and the largely unknown long term effects of quantitative easing have impacted confidence. It must be said, however, that the bond markets are hardly meeting expectations in the current market environment.
What we are seeing are emerging opportunities and demand for new financial structures and new forms of capital raising. In the wake of the rise and fall of the London IPO, a more varied financial ecosystem is developing and this in and of itself illustrates the health and virility of the mature London market.
Admittedly, it is more difficult to access capital given the regulatory changes of Volcker and additional liquidity requirements imposed by Basel III but alternative corporate forms and structures giving access to capital are flourishing.
Law firms (and particularly those representing the international financial centres) are adapting to the complex and rapidly changing financial markets to facilitate the efficient use of capital. With so many global companies, hedge funds, private equity houses, and all of the world's 5 truly global banks, having headquarters or a very significant presence in London, being located in London is vital for law firms.
Being part of the London financial community gives us access to new business networks and means that we are available to meet with our clients face to face to develop a better understanding and appreciation of their businesses.
So we're seeing the space left by the 150 year-old behemoth that is the IPO being filled by new financial structures, new forms of equity raising, and, in some cases the resurgence of structures and forms that were thought to be extinct.
Thus in the wake of the rise and fall of the London IPO we are seeing a much more robust and varied financial ecosystem develop and this in and of itself illustrates the health and virility of the mature London market. Like any wannabe successful City business, law firms will have to adapt to the complex and rapidly changing financial markets otherwise they will fail. They will need to be right there with their clients at the forefront of this new financial frontier.
There will undoubtedly be uncertain times ahead, but there are opportunities for companies to grow and prosper whether through a strategically launched IPO or some other financial structure. Taking advantage of these opportunities is the key to success and often requires law firms to know their clients business, know their clients objectives and help their clients on what can be complex financial structurings.
And this is not just English or US law firms. We have seen many other jurisdictions represented in London in recent years as people come to realise that being in one financial centre benefits everyone.
It is worth noting that, although the Global Financial Centres Index ranks Asian centres highly, London is still number one in that index. Indeed, firms such as Walkers with principal offices in jurisdictions such as Jersey, the Cayman Islands, the British Virgin Islands and Ireland have maintained a London presence throughout the recent financial tumult. Walkers will continue to do so and many firms, Walkers included, believe that the case for having, and indeed developing, their London office, is growing stronger as clients seek advice on a wide ranging and even more complex plethora of financial structures that are being developed here.
This development will only accelerate as the Eurozone crisis begins to resolve itself and the markets once again begin their upward cycle. Far from constituting problems, the development of emerging markets (and the move of the IPO eastward), increased regulation and the difficult economic climate in fact serve as motives to continue a London presence.