Wall Street Beats British Banks to London’s Hottest IPO Mandates

(Bloomberg) -- Home-grown companies are listing in London at the fastest pace since Brexit, but the boom has done little for Britain’s financiers.

U.S. investment banks have snapped up top positions -- and hefty underwriting fees that go with them -- on the biggest deals.

DNA-sequencing company Oxford Nanopore Technologies Plc, hailed as a “British success story” by investors, hired Bank of America Corp., Citigroup Inc. and JPMorgan Chase & Co. as global coordinators for its 524 million-pound ($707 million) initial public offering on Thursday. 

Nanopore was hardly alone among British companies going public. Food-delivery startup Deliveroo Plc, private equity firm Bridgepoint Group Plc, bootmaker Dr. Martens Plc and online gift shop Moonpig Group Plc all picked only U.S. banks as top-tier advisers, with U.K. underwriters relegated to the second line.

“We are increasingly seeing local banks in the U.K. and across Europe lose out on strategic business,” said Eric Li, head of transaction banking at analytics firm Coalition Greenwich.

After several sluggish years, IPOs have boomed in the U.K, with domestic issuers leading the charge. The London market, which is competing with euro-area financial centers like Amsterdam and Frankfurt, has gotten a boost from regulatory reform aimed at easing companies’ path to market.

But for local banks, the changes are yet to result in a windfall. To be sure, Wall Street has always dominated equity adviser rankings in Britain, and this year seems to be no different. Bloomberg’s league table for U.K. IPOs has American banks taking the first three spots, with Barclays Plc and Numis Corp. Plc in fourth and fifth places. 

The two U.K. banks are winners in the sector known as corporate broking -- a uniquely British corner of investment banking, where firms provide go-to advice to listed companies on everything from strategy to shareholder engagement. The bet is that these relationships will lead to more lucrative roles on capital market transactions and acquisitions.

“On the back of strong corporate broking relationships, U.K. banks briefly made headway last year,” said Li, “but 2021 has seen the balance revert to normal, with U.S. underwriters taking the bulk of the winnings from the IPO boom.” 

British underwriters dominate the smaller end of the market and often get more junior roles on big IPOs. This is small comfort, however, as the bulk of underwriting fees are soaked up by the global coordinators steering the ship.

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