IMN: Market poised for pick up in M&A and IPO activity
02 February 2024 US
Image: Lexy_Milliken_Marketing_Manager_at_IMN
The industry is poised to face additional M&A and IPO activity in 2024, according to panellists at the IMN Securities Finance & Collateral Management Conference.
Speakers at the event in Nashville discussed the drivers of trading in 2024 and special trading opportunities — noting that specials revenues reached an “all time high” in 2023 generating US$5.1 billion, according to S&P Global Market Intelligence data.
eSeclending CEO Craig Starble identified “a lot of activity” in the M&A space and suggested that M&A and IPO deals are going to “pick up” and prove beneficial to market participants.
A decline in interest rates should “loosen up some financing” to disperse more M&A activity this year, added Anthony Toscano, head of North America Global Securities Lending Solutions at MUFG Investor Services.
“We cannot forget that we are in an election year. The regulatory climate that most financial institutions have been in — should there be a change in administration — may loosen a bit. Participants should speak with borrowers to find out where counterparty demand is best served and how to structure correctly for capital efficiency,” he added.
During the discussion, Michael Daly, vice president of client service and relationship management at Goldman Sachs Agency Lending, indicated that while M&A and IPO activity has remained largely muted, despite some bright spots in Q3 2023, most corporations are continuing to look for a more normalised environment before making decisions on restructuring or going to IPO with their companies.
In general, Goldman Sachs has seen a backlog of IPO activity, the highest it has ever been.
There are currently more than 50 companies in various stages of investor engagement in this space. “IPOs are largely looking to come back this year — not all of these will have securities lending revenue attached to it, but that will be a relatively healthy space as well,” Daly explained.
Speaking to the rest of the panel, Daly indicated that the macroeconomic landscape continues to improve, and as the Fed begins to decrease interest rates — possibly as early as March — the market will likely see additional M&A activity in 2024.
As the panel discussion came to a close, panellists reviewed the largest risks facing firms over the coming 12 months.
Some of the main challenges facing institutions, according to Starble, relate to rate changes and operational challenges in respect of T+1. He further considered the difficulty in continuing to generate “proper revenue” for clients throughout this process. “It is our problem, not our client’s problem, to deal with regulatory requirements and operational challenges.”
For agent lenders, trades are becoming thinner from a margin perspective and costs are increasing.
Justin Aldridge, head of agency lending for Fidelity Investments, said: “The biggest challenge is continuing to evolve to support the borrower community.
“With capital constraints, it is becoming increasingly difficult for borrowers to support the businesses that they have. It is on us as an agent lending community to find solutions that work to navigate the regulatory requirements that they have.
“There are five prime brokers that represent 85 per cent of the market. The barriers to entry for prime brokers are high and very capital intensive. We need to continue to find routes to market that will reduce capital and allow them to grow in an efficient manner.
Speakers at the event in Nashville discussed the drivers of trading in 2024 and special trading opportunities — noting that specials revenues reached an “all time high” in 2023 generating US$5.1 billion, according to S&P Global Market Intelligence data.
eSeclending CEO Craig Starble identified “a lot of activity” in the M&A space and suggested that M&A and IPO deals are going to “pick up” and prove beneficial to market participants.
A decline in interest rates should “loosen up some financing” to disperse more M&A activity this year, added Anthony Toscano, head of North America Global Securities Lending Solutions at MUFG Investor Services.
“We cannot forget that we are in an election year. The regulatory climate that most financial institutions have been in — should there be a change in administration — may loosen a bit. Participants should speak with borrowers to find out where counterparty demand is best served and how to structure correctly for capital efficiency,” he added.
During the discussion, Michael Daly, vice president of client service and relationship management at Goldman Sachs Agency Lending, indicated that while M&A and IPO activity has remained largely muted, despite some bright spots in Q3 2023, most corporations are continuing to look for a more normalised environment before making decisions on restructuring or going to IPO with their companies.
In general, Goldman Sachs has seen a backlog of IPO activity, the highest it has ever been.
There are currently more than 50 companies in various stages of investor engagement in this space. “IPOs are largely looking to come back this year — not all of these will have securities lending revenue attached to it, but that will be a relatively healthy space as well,” Daly explained.
Speaking to the rest of the panel, Daly indicated that the macroeconomic landscape continues to improve, and as the Fed begins to decrease interest rates — possibly as early as March — the market will likely see additional M&A activity in 2024.
As the panel discussion came to a close, panellists reviewed the largest risks facing firms over the coming 12 months.
Some of the main challenges facing institutions, according to Starble, relate to rate changes and operational challenges in respect of T+1. He further considered the difficulty in continuing to generate “proper revenue” for clients throughout this process. “It is our problem, not our client’s problem, to deal with regulatory requirements and operational challenges.”
For agent lenders, trades are becoming thinner from a margin perspective and costs are increasing.
Justin Aldridge, head of agency lending for Fidelity Investments, said: “The biggest challenge is continuing to evolve to support the borrower community.
“With capital constraints, it is becoming increasingly difficult for borrowers to support the businesses that they have. It is on us as an agent lending community to find solutions that work to navigate the regulatory requirements that they have.
“There are five prime brokers that represent 85 per cent of the market. The barriers to entry for prime brokers are high and very capital intensive. We need to continue to find routes to market that will reduce capital and allow them to grow in an efficient manner.
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BNP Paribas reports strong business drive, particularly for private capital
BNP Paribas reports strong business drive, particularly for private capital
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