THE SCOTSMAN THURSDAY 12 NOVEMBER 2009 SCOTTISH LEGAL REVIEW 17
BURKE AND SHARE
Edinburgh Dungeon
owner Merlin
Entertainments is
reported to be in the
frame for a stock
market flotation
Picture: Susan Burrell
TWELVEmonthsago,mergersand
acquisitions (M&A) were few and
farbetweenandtheprivateequity
market had slumped. The IPO
market was closed and secondary
issues were confined to a few big
caps. The economy was continuing
to deteriorate and the number of
insolvencies and corporate
reconstructions were increasing.
The transaction pipeline for most
deal-makers was bleak.
One year on, how are deal-
makers faring in the real economy
against the background of much
improved stock market sentiment
and upbeat media comment?
Deal activity levels are up. The
improved stock-market
sentiment is now increasingly
reflected in corporates' and deal-
makers' intentions and pipelines.
Over recent months, both M&A
transactions and secondary
issues on the public markets have
increased, although mainstream
private equity activity has
remained weak. Investment banks
are now privately talking up their
IPO pipelines for the first half of
2010.
Many deals have, however,
been sector specific. The energy
sector continues to be very active
for us, acting in Cairn Energy's
$310 million (�190m) sale of
certain Offshore Greenland
interests and shares, and in
BowLeven's sale of certain
Cameroon interests for up to
$225m (�138m) � as well as acting
in recent months in placings
raising a total of �187m for clients
in the oil and gas sector.
Deal activity is undoubtedly
going to continue to be held back
until the banks return to "normal"
lending. Time will tell the extent to
which the improvement in
sentiment on the ground will
result in a continued increase in
deal activity across the board.
companies to generate cash becomes
much more difficult to confirm and
potentialbuyershavetheirworkcutout
doing due diligence on sales forecasts
andthelike.
M&A transactions and management
buy-outs are only part of the workload
of a corporate finance team. Helping
clients raise money and prepare assets
for sale, along with assisting in the sale,
are also mainstream business. Will
points out that his team has been
involvedinsubstantialfundraisingsfor
Cairn Energy and the oil exploration
company Bowleven. Cairn sold some
offshore asets for �320 million and
Bowleven conducted a rights issue for
�114m. "What these two deals show is
that activities at present tend to be very
sectorspecific.Wedoalotofworkinthe
energysectorandthatishelpingus,"he
says.
Will points out that there is increas-
ing talk of the Initial Public Offering
(IPO) market opening up again early in
2010."Therehavebeensomesuccessful
secondary rights issues, obviously by
banks,butalsobyothercompaniesthat
are well known to investors. However,
the IPO market has been very much
closed for business. However, speaking
to investment bankers, they are now all
talking up their IPO pipelines for the
firsthalfof2010,"hesays.
This is supported by the fact that the
private equity group Blackstone is
planningastockmarketflotationforits
Merlin Entertainments theme park
group, according to recent reports in
the financial press. The planned IPO is
expectedtosetthestageforanumberof
new UK listings in early 2010. If this
happens, Will points out, it would help
Scottish deal makers enormously by
providing an exit opportunity, once
again, for private equity investors, thus
pavingthewayforanupsurgeincorpo-
ratedeals.
Michael Polson, head of corporate at
Dundas and Wilson, is optimistic that
Scotlandisnowstartingtoemergefrom
the worst of the downturn. "The degree
ofstabilitythatwehaveseeninthestock
market over the last few months has
undoubtedly been helpful. We have
seenquiteabitoffundraisingandsome
corporatetocorporatetransactions,"he
comments.
Polson says that after the credit
crunchfirsthit,largetickettransactions
in the hundreds of millions stopped in-
stantly. However, smaller transactions
thatwerealreadyinthepipelinecontin-
ued to filter through for some months,
creating a kind of phased downturn to
deal-making. "It wasn't a crash from
mad busy to nothing, but we could see
the shape of things to come, with few
newdealshittingthepipeline,"hesays.
What has changed in the last few
months is that although the deeper
problemsinsomebanksmaynotbeen-
tirely resolved yet, they have been re-
solved sufficiently to enable those
banks to open for business again. But
the issue for deal makers is finding the
sectors and the deal size that banks are
now willing to support. "They are still
overweight in property, so property
deals are very difficult to make work
unlesstheunderlyingfundamentalsare
absolutelyfirstclass,"hesays.
In his view, the market remains very
difficult to predict at present, beyond
theendofthecurrentquarter."Coming
backafterthesummer,wehavedefinite-
lyseenastepupinactivitylevels,andwe
expect this to continue through to
Christmas. All in all, I am cautiously
optimistic,butonehastorecognisethat
some of the fundamentals are not yet
aligned.Wewillnotbetakinganymedi-
umtolong-termdecisionsbasedonthe
few positive signs that we are seeing, or
ontheslightupsurgeinconfidencethat
themarketiscurrentlyexperiencing."
This is a
slightly
strange
period that
we are
going
through

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