Prospects for European PIPEs limited

Opportunities for private investment in public equities (PIPES) are likely to be limited to special situations in Europe say speakers at a recent private equity conference.

Despite the recent growth of activity in private equity investment in public equities in the US, PIPE transactions are unlikely to have the same impact on the European market, according to speakers at a recent private equity conference.

Speaking at a conference hosted by law firm SJ Berwin, Benedict Tompkins at M&A advisor Broadview International said he believed that PIPE deals would be limited to special situations in Europe. In the UK especially, the ability to execute public-to-private deals reduces the need for such transactions, he said.


John Daghlian, a partner at SJ Berwin said UK PIPE deals are hindered by the legal framework which is likely to constrain the market. “We are unlikely to see the explosion of those deals which took place in the United States,” said Daghlian. “However, in distressed situations the regulatory authorities and other shareholders do not present the same problems. In such special situations, there are likely to be good opportunities in the coming years.”


According to US-based research firm PlacementTracker, PIPE transactions increased steadily between 1998 and 2000, although activity in the sector has since declined. In 1998, $3bn was generated through PIPE transaction, increasing to $24.7bn in 2000. In 2001, the volume of PIPE deals fell to $15.2bn, and to $12.1bn in 2002. 


Also, according to US PIPE tracking firm PrivateRaise, 88 per cent of US PIPE deals took place in companies with a value of less than $250m, while activity was highly concentrated in a limited number of industry sectors. Four industry sectors – pharmaceuticals, energy, biotech and medical equipment – accounted for more than 25 per cent of the aggregate number of PIPE transactions executed in 2002.


There have been relatively few PIPE transactions in Europe, although earlier this year US-based private equity firm General Atlantic Partners invested £34m in iSoft, a supplier of software applications for the health sector. General Atlantic subscribed for 5.8m of new ordinary shares in the company. The firm also acquired 10m existing ordinary shares in the company from the founders of iSoft.