London is still one of the top destinations for large international companies when it comes to listing, according to new research from KPMG.
Results from the accountancy giant’s survey showed 86 per cent of senior European and UK Equity Market (ECM) leaders said they would consider the capital to float.
Meanwhile, New York topped the research (94 per cent) while half selected Amsterdam.
THG founder Matt Moulding has led the criticism of the London Stock Exchange in recent months, claiming London was no longer the place where ambitious companies go to raise investment after the sale of Hotel Chocolat to US confectionery giant Mars.
Last November Moulding pointed out that the amount of capital raised on IPOs in London was now lower than Turkey and Romania with over 100 companies choosing to leave London.
Aadam Brown, head of Independent Equity Capital Markets Advisory at KPMG UK, said: “While UK listing activity was muted in 2023 – as was the case across most of Europe – London has not lost its lustre.
“Our survey shows that alongside New York, London is still considered a key destination of choice for large international companies.
“When it comes to where to list, it boils down to identifying the natural footprint or home of the company – usually determined by factors such as the location of a company’s headquarters and its largest sales region.
“For those exploring foreign listing venues beyond their home country, there needs to be a strong rationale.”
The survey also found that 91 per cent of ECM leaders expect the UK Initial Public Offering (IPO) market to return to normal activity levels in 2025.
Meanwhile, two-thirds believe that IPOs issued in the EMEA region in 2024 will be led by the Middle East, followed by Germany.
Brown said: “The challenges that have persisted, both economically and geopolitically, have slowed down the UK and European IPO market recovery.
“While expectations were initially that activity would pick up in the second half of 2023, recovery is now anticipated towards the end of 2024 and into 2025. This, however, could be accelerated by a few successful IPOs.
“Fund flows out of UK equities was the standout answer to why UK equity markets were not operating efficiently, especially in the context of UK IPO activity.
“While some of this de-equitisation has been many years in the making, some of it can be reversed with a better economic backdrop and positive sentiment.”
Over the past year, several developments have taken place in the UK to try and improve the attractiveness of IPOs, including listing rules reform.
Moulding bids farewell to the ‘stiff upper lip’ and fights back
However, the majority (78 per cent) of ECM leaders identified pension reform as the most important action that needs to be taken, followed by ISA reform. Remuneration of management is also another key factor that respondents say needs to be addressed.
Brown concluded: “While ECM leaders were slightly more conservative on predicting a return to normalised UK IPO market conditions in this year’s survey, it does feel like we are heading to an inflection point.
“Better market sentiment and investor appetite will begin to shine through. It only takes a few successful IPOs of high-quality companies to turn markets around, and there is every reason to believe this inflection point will occur in 2024.”
KPMG Independent Equity Capital Markets (ECM) Advisory’s Survey of UK ECM leaders was conducted during November and December 2023, exploring topics such as the UK IPO market recovery, key future expected themes in IPO markets and reflections on the IPO process.
Participants included 32 UK and European ECM leaders across the large US and European Investment Banks, through to the UK Small and Midcap Brokers.