The new issue market for equities was hit by a deal drought this year as the credit crunch continued to bite and nervous investors refused to invest in anything but the strongest of companies, according to data from Thomson Reuters.

Resolution, Clive Cowdery’s new-look investment vehicle, dominated the pure stock market flotations that did make it to market in the past year.

The other companies to have raised fresh capital by issuing shares tended to be high street banks, such as Royal Bank of Scotland, HBOS and Lloyds TSB. They issued ordinary and preference shares as part of the Government’s £37 billion bailout programme.

Mr Cowdery’s operation raised £600 million to help to fund a drive to buy UK life insurers and asset managers over the coming months. However, despite the interest in Mr Cowdery, a high-profile insurance entrepreneur who has already made a personal fortune estimated at £145 million by selling Resolution once, the group had to rely on investors who knew it of old. Standard Life, Legal & General, M&G and Insight, the fund management stalwarts who previously had invested in Resolution, are all thought to have bought shares in the company’s December listing on the London Stock Exchange.

Although Resolution was marketed to a string of American investment funds, as well as sovereign wealth and hedge funds, few new buyers are thought to have subscribed to the issue, instead choosing to wait in the wings until the group does its first deal. According to the figures from Thomson Reuters, Resolution raised almost twice the combined proceeds raised by the four companies that follow it in a list of the year’s biggest equity capital-raisings.

Cadogan Petroleum, the energy and power group, raised barely a quarter of the sum garnered by Resolution at the beginning of the month, having tapped investors for £152.8 million in June. Bankers said that the dearth of new issues meant that fees for underwriting new equity issues had also plummeted this year.

“The Government doesn’t pay; banks do the work for the status,” one investment banker said. He added that underwriting fees had fallen below 1 per cent of the amount raised. This meant that Citi, Merrill Lynch and HSBC, which ran the books on Resolution’s listing, shared fees of less than £6 million for their role in the deal. Lazard, Resolution’s long-standing relationship bank, advised it on the float.

The sharp slowdown in activity also marked a setback for the London Stock Exchange, whose shares have dropped from highs near £20 each to last week’s close of £5.67 amid worries that revenues will slump. Only 15 companies have used the LSE to issue equity capital this year, according to Thomson Reuters, between them raising the equivalent of just over $8.5 billion.

This is less than a third of the $25 billion raised by the 17 companies that have listed in New York, one of the LSE’s main rivals, this year. Moreover, it is less than the $9.2 billion raised by companies listing in Saudi Arabia and a clear indication of a shift in the balance of power among stock exchanges.

Hong Kong was not far behind London as an attractive market to list on, with 26 companies issuing equities this year to raise just shy of $8 billion.

RBS looked set to end the year as the No 1 underwriter of new share issues, having worked on ten deals worth £5.7 billion to claim an 18 per cent share of the market, according to Thomson Reuters figures.

RBS, in which the British taxpayer now holds a 58 per cent stake, is followed in a league table of the top underwriters for the year by Merrill Lynch, Goldman Sachs, Morgan Stanley and Dresdner Kleinwort.

Key findings

— Barclays, in seventh place, is the highest-ranking British bank for investment banking fees this year, with £98 million in fees. This is a rise of three places for the bank, from tenth last year

— Royal Bank of Scotland tops both the UK equity capital markets and the debt capital markets tables in 2008, up from fourth and second in 2007 respectively

— At £1,517 billion, global M&A activity is down 28 per cent from 2007 (£2,087 billion) and at a three-year low

— UK-targeted M&A totalled a four-year low of £146 billion in 2008, down 25 per cent from 2007

— Domestic M&A reached an eight-year record at £73 billion, boosted by the part-nationalisation of the British banking system

— Cross-border M&A is down 40 per cent from last year and at a five-year low. Nevertheless, the UK was still the second-most-targeted country for cross-border acquisitions in 2008

— Overseas acquisitions by British companies are down 74 per cent from 2007 at a four-year low of £48 billion

— The number of debt restructuring deals is up for the first time in six years, with 24 transactions announced in 2008

— British banks raised in excess of £62 billion through part-nationalisation, privately negotiated share placements and equity offerings in 2008

— Goldman Sachs could retain top spot of the global M&A rankings for the fifth consecutive year. JPMorgan, Citigroup, UBS, Credit Suisse and BNP have all improved their rankings since 2004, while Morgan Stanley, Merrill Lynch, Deutsche Bank & Rothschild all ended 2008 lower than five years ago

— Winner and losers in the capital markets league tables: JPMorgan is on par in top position, Barclays, Deutsche & Goldman Sachs improved their rankings. Citi, Morgan Stanley, Credit Suisse and UBS finish lower than in 2004

Source: Thomson Reuters data for 2008 (Jan 1 to Dec 19)

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