With the merger of SBC and UBS and the sudden exit of both BZW and NatWest from the equities business, one might expect the sinking fees on new international equity issues to be thrown a life-line. Less competition should mean wider margins with fees on international equity deals coming to resemble those in the US, where a lead underwriter can expect 7% for an IPO, down to 3% to 4% for a secondary offer for a large, well-known stock. So, is there any sign of fees rising yet?
High-profile privatization mandates awarded over the past month seem to offer scant hope for hard-pushed equity capital-markets teams. "Every time we think it's going to bottom out, somebody comes along and does a deal at a lower margin," says Nigel à Brassard, chairman of equity capital markets at Dresdner Kleinwort Benson. Not least, Dresdner Kleinwort Benson itself. In February, it won the mandate as global coordinator for the $5 billion sale of stock in Endesa at the lowest spread to date on a Spanish privatization - just 1.7%.
As the third offering of Endesa shares one could argue that the lower fee is justified because much of the risk is removed from the transaction.