London’s financial sector is undergoing a significant transformation as the once-reliable flow of initial public offerings (IPOs) has slowed dramatically, forcing investment banks to adapt their business models and seek alternative sources of revenue.
A Shift in Revenue Streams
Just a few years ago, IPOs were a cornerstone of revenue for many banks in the City, keeping teams of dealmakers engaged for months and cementing long-term client relationships. Today, however, IPO activity has fallen to its lowest levels in three decades. In the first half of this year, only £8.8 billion was raised through IPOs and follow-on issuance, compared to the boom years of 2021, when 59 main market IPOs and 66 on Aim were completed.
So far this year, London has seen only three IPOs on the main market and seven on Aim, reflecting a global trend where private capital enables businesses to remain unlisted for longer. The migration of companies such as Flutter and Wise to New York has further dented London’s competitiveness in attracting high-profile listings.
Bankers Pivot to Advisory and Private Capital
With IPO revenue dwindling, investment bankers have increasingly pivoted to advisory services, debt financing, secondary market transactions, and private placements. Bidhi Bhoma, deputy CEO of Panmure Liberum, noted that his firm now generates more than half of its revenue from advisory work, compared with just 25% five years ago.
Henrik Johnsson, chair of Deutsche Numis, explained that banks have shifted focus to areas such as bid defence, vulnerability assessments, and shareholder engagement strategies. These services, while less visible than IPOs, have become critical to maintaining client relationships.
Other bankers are facilitating “private IPOs,” where companies raise funds directly from selected investors rather than the public markets. This model, increasingly popular with private equity firms, has opened new revenue streams for investment banks.
Shorter Projects, Different Challenges
While IPOs can tie up bankers for a year or more, many of the alternative activities—secondary placements, debt advisory, or private offerings—are shorter in duration but still profitable. Some bankers even prefer the shift, noting that IPOs, despite securing long-term clients, often involve complex syndicates and divided fees.
Still, the decline in listings has created a structural challenge for smaller, mid-market banks that historically relied heavily on IPO activity. By contrast, large US banks such as Goldman Sachs and JPMorgan, with broader business lines and trading divisions, have been less exposed to the downturn.
Consolidation in the Market
To withstand the slowdown, mid-market firms have pursued consolidation. Panmure Liberum emerged from the merger of Liberum and Panmure Gordon, while Deutsche Bank acquired Numis, and FinnCap joined forces with Cenkos to form Cavendish Capital Markets. These mergers reflect a strategy to diversify offerings and build resilience.
Outlook for the Future
Despite the challenging environment, optimism remains. Bhoma predicts that while a surge of IPOs is unlikely in the near term, improvements may come by 2026. He added that strong companies will eventually return to the market, either because private equity assets are unsuitable for secondary deals or because public markets become more attractive.
For now, however, London’s investment bankers are adapting to a new reality—one where advisory services, private capital, and strategic flexibility have replaced IPOs as the pillars of survival.
