Investec helps to revive UK IPO market with Hollywood Bowl

Hollywood Bowl runs 10-pin bowling centres across the country

Hollywood Bowl, which runs 10-pin bowling centres across the country, plans to raise £181.3 million in an initial public offering on the London Stock Exchange’s main market. It priced on September 16 and dealing is expected to start on September 21.

The listing will be the first sizeable IPO on London’s main market since the UK’s vote to leave the European Union on June 23, and the first such deal post-referendum other than a $ 1.2 million listing of Papillon Holdings, an investment company, on June 24. Hollywood Bowl’s deal will also dwarf the handful of listings on London’s AIM market since the Brexit vote.

The IPO was not a guaranteed success.

Hollywood Bowl, which was acquired in an Electra Private Equity-backed management buyout in September 2014, announced its intention to float in mid-June, with Investec acting as sole sponsor, financial adviser and bookrunner. The company said at the time that it “expected the admission will occur in July 2016”.

The result of the referendum put paid to those plans.

Investec director and head of consumer Levin, who led the bank’s work on the deal, told Financial News: “We did the work, we were ready to go pre-Brexit. And then we had to wait for the result, and I think it was pretty clear that it would have been crazy to go in the maelstrom that came about in the immediate aftermath of Brexit.”

Indeed, many companies pulled IPO plans following the vote, after which the seasonal summer slowdown was in effect.

Levin said: “What we concluded was that we had a very good business with a very good management team, with a good growth story that was suited to the public markets. We decide that we would be first out of the traps post the summer hiatus, provided the backdrop had improved at least a little bit.”

Hollywood Bowl’s IPO pricing comes at the end of a week in which the UK equity capital markets showed signs of life.

Waste management company Biffa and gym operator PureGym announced plans to float in the space of 24 hours. Earlier in September, Jackpotjoy revealed its IPO intentions. Esure is planning to demerge and list its Gocompare business. As well as Investec, advisers including Credit Suisse, JP Morgan and Rothschild have won roles on planned listings.

Potential big-ticket IPOs, such as listings of mobile operator O2 and software company Misys, are also highly anticipated.

But while bankers hope to be kept busy, Levin is trying to be realistic.

“It doesn’t feel like a bonanza”, he said of the wider IPO market, adding: “The market is in decent shape, but I think fund managers are very discriminating. Because of the hiatus just before and post-Brexit, we’re at the very early stages. However long it’s going to last is going to be impacted by economic considerations, political considerations, constitutional considerations. There’s going to be bumps in the road. But fundamentally what this shows is you can get a very good roadshow and a very good hit rate with a good company with good management.”

Speaking to FN before the Hollywood Bowl IPO priced, Gavin Gordon, a private equity partner at law firm Kirkland & Ellis, told FN that private equity sellers considering listings for their portfolio companies still faced “genuine volatility risk”.

Gordon said: “The obvious issue for sellers with the IPO market is that it opens and shuts and so there is risk that whether it is a Brexit event, an election event or economic event, you do a lot of preparation and suddenly the market isn’t available at pricing that is attractive enough.”

Mark Austin, a partner at law firm Freshfields Bruckhaus Deringer, which has roles on the Biffa and PureGym floats and on the Gocompare demerger, said companies were looking to put their pre-referendum plans back in action rather than face a long wait for further clarity around the terms of Brexit. “At the moment nobody really knows what Brexit means, so there’s a sense of ‘let’s get on with it – we’re not going to sit on our hands for two years or more’,” said Austin.

Another lawyer said he expected the IPO window to be “narrow”, and that there would be “five or six” IPOs during the rest of the year.

Additional reporting by Lucy Burton and Yolanda Bobeldijk

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