Best Bank for Small Cap Equity Capital Markets – Berenberg
Raising equity can be hard for small and mid-cap corporates in Europe. Too small to attract the bulge bracket banks, too big for local brokers to handle — but for Berenberg an opportunity to expand beyond its 430 year-old roots in Germany.
“We’ve built one of the largest research platforms in Europe, with 130 equity analysts covering 1200 stocks, and the largest distribution capacity with 80, salespeople and sales traders, across Europe, the UK and the US,” says Fabian de Smet, CFA, head of investment banking in continental Europe at Berenberg. “It was a natural move to start to expand investment banking across Europe by monetizing the platform that we’ve built over the last 10 years in equity research and sales.”
Adding investment banking capability — it now has a team of 75 bankers and is continuing to hire aggressively – has given it the tools to unlock ECM business in this under-served European small and mid-cap sector. The firm sees corporates in the €500m to €5bn market capitalisation bracket as its sweet spot.
“We saw, especially last year, a huge opportunity opening, mainly thanks to the MiFID regulations which left a lot of local brokers struggling to compete and to survive and to retain talent. Berenberg has positioned itself as the go-to bank for these companies,” says de Smet.
He ticks off a list of achievements in 2020. The investment bank worked on 67 deals of which three-quarters were outside its home DACH region (Germany, Austria and Switzerland) and 90% were global coordinator mandates.
In the UK, for instance, Berenberg is now corporate broker to 40 companies, while its US business has been particularly strong in cross-Atlantic transactions. Its 12 US deals last year included trades for Germany-headquartered Covid-19 vaccine pioneers, CureVac, which listed in a $210m IPO, and BioNTech, which raised $510m from a rights offering.
In Benelux, de Smet highlights the first green special purpose acquisition company listing in Europe for ESG Core Investments. What’s more, in France, Berenberg brought the only IPO of the year, for video game maker Nacon. The firm also planted its flag for the first time in Spain, taking an active role on the IPO of Soltec as the only non-local bank in the syndicate.
“We are very proud of that,” says de Smet. “This is really the role that we’re playing right now: partnering with the local banks to bring pan-European investor distribution. We pride ourselves on European-ising the shareholder register for these companies.”
Berenberg has long taken a high-touch approach to equity brokerage even as its bulge bracket competitors push towards low-touch automation and a focus on the 75 or so big, global tier one investors. It means a larger salesforce and the capability to bring smaller investors into ECM transactions.
“Having tier two and tier three investors in an ECM transaction is critical,” says de Smet. “We’ve shown that with lots of small orders you can create momentum and cover the books on the first day – as we’ve done on 90% of our IPOs.”
The year was, of course, marked by the Covid-19 pandemic but Berenberg was on the front foot in that regard, too. In March, at the height of the market panic, its bankers were on the phone with corporate clients in sectors such as leisure and retail, helping raise equity to strengthen their balance sheets and get through the storm.
At the same time, it was proactive in approaching corporates that benefited from lockdown economics, such as acting as joint global coordinator for Eurofins Scientific as it raised €535m to increase its Covid testing capacity, and as joint bookrunner for Embracer as it raised Skr1.6bn (€158m) of funding to support its growth in the video games market.
“In the second half of the year when the IPO market picked up, we were very quick to adapt, whether that was using new technology such as the first fully virtual IPO for German consumer health company PharmaSGP, or bringing in cornerstone investors, as in Unifiedpost Group, to de-risk transactions,” he says.
The culture that Berenberg has built combines its close client and investor relationships, its broad and deep cash equities platform and this agile, entrepreneurial approach — a culture that de Smet says springs from the firm’s enduring partnership structure. “That’s really our differentiating factor and the key our success,” he adds. GC