According to Martin Fisch, head of ECM structured solutions for Deutsche Bank in EMEA, the big theme of the convertibles market now is M&A activity. “You can access the market quite quickly as they can be put together in less than a week and placed into the market in a single day. It offers cheap funding, and with M&A on the rise, usage will only increase. Also M&A naturally makes a market more volatile, and that translates into better pricing for converts.”
However, Julian Hall, global head of equity-linked origination at ABN Amro, notes that convertible issuance in M&A transactions is not yet nearly as buoyant as many predicted it would be. “Europe has actually recorded a 91% increase this quarter in convertible issuance, but if you go through the 13 issues that have come out in the first three months, only three are M&A related, and two are monetizations. So we are not seeing the wall of M&A financing that everyone predicted.”
Early in the cycle
Hall continues: “That is because the EU bank market is so liquid that people will put a bank bridge in place first, and then look down the line to refinance that.