• High cost of debt, bid for equities should spur corporate M&A financing
• Rising yields, geopolitical instability, AI nervousness could shut window

The continued running of a global equity bull market despite bearish bond sentiment offers sponsors and large corporates a key window to sell European equity before a possible downturn.

US and European sovereign bond yields sit around post-crisis highs, yet equities also remain close to record valuations. The Stoxx 600 closed Friday still up around 7% YTD and up 15% over the last twelve months.

It has, however, dipped almost 4% since hitting an all-time high in August. US markets, while also showing healthy YTD and 12-month gains have lost momentum in recent weeks and are trading either flat or down from levels at the beginning of summer.

With reference share prices close to, or at, high watermarks, stock sentiment uncertain, plus a rising number of risk factors alongside rising sovereign debt yields, equity sellers should be rushing to get deals together.

Those that have already done so were able to print at size, despite periods of higher volatility this month.

Earlier in September, Italian-listed Prysmian completed an EUR 850m raise through an overnight placement to help fund its Atkore acquisition.

Secondary sell-downs have also been busy, with sizeable offerings in Aker BP and SMG Swiss Marketplace Group completed this month, despite the latter being well below IPO price.

The deals have taken place against the backdrop of panic in the bond markets, showing that investors are still willing to put money into European equities.

“YTD levels are still very supportive, especially in a lot of the software names that took a hit earlier in the year which have now rebounded,” said an ECM banker.

“There is a lot of long-only investment in some of these sectors and strong annual numbers means investors are still willing to put money to work,” he added.

The post-pandemic European ECM landscape has shown a subtle shift in investor appetite, which has been well encapsulated this year. While once Europe was a market dominated by larger-listings and a healthy pipeline of smaller block trades, those conditions have reversed.

Investor preference for the safety of large, already liquid stocks in a more volatile world has transformed the issuance picture for Europe towards smaller total deal numbers, heavily concentrated on large sell-downs in higher value listed businesses.

Source: Dealogic, ECM issuance by pricing YTD

While the EUR 3.8bn Amsterdam listing of defence contractor CSG was a promising start to the 2026, no other listing has been priced at a deal value of over USD 1bn.

By contrast, there have been 12 USD 1bn-plus blocks in Europe so far this year, across both primary and secondary offerings. It is clear to see where Europe’s equity capital markets are most effective.

Liquidity for European sell-downs remains exceptionally healthy for the right names.

Meanwhile, Europe’s IPO market remains thin – and reports that Franco-German tank maker KNDS is likely to delay any attempt to revive a dual-listing in Frankfurt and Paris will dampen the mood further among dealmakers.

There are still a handful of other IPOs left in the European pipe, as ECM Pulse wrote last week, but there is a strong expectation that both primary and secondary follow-ons will dominate issuance through the final months of 2026, as they have done through the year so far.

“I expect the rest of 2026 will be skewed towards follow-ons rather than massive IPOs,” an ECM adviser noted. “This is the segment of the market that is working.”

Deal now

For companies seeking to fund transformational M&A through an equity deal, like Prysmian, the market appears to be at a sweet spot.

Growing inflation, instability in the Middle East and the impact on global energy supply chains together emphasise more than ever the need for corporate scale in an uncertain and challenging world.

Equity should be seen in boardrooms as a currency, either through share considerations or a financing tool, not just a valuation benchmark.

It gives large, listed, corporates a unique advantage to target transformational scale, like in the case of Swiss-listed Zurich Insurance Group earlier this year in an accelerated placement, funding its acquisition of Beazley.

“If you are in a popular sector and investors want to fund your M&A plans, you have to ask whether the market will get a lot better in terms of absolute share prices,” said a second banker. “So, if you aren’t doing that now the question has got to be ‘why not?’”

And given the attractiveness of equity issuance versus debt, there is a serious economic advantage to being a listed corporate with the ability to undertake equity financing.

Many CEOs who have seen their prices rise steadily in 2026, albeit dipping below recent highs, may be thinking “why rush?”

But history will attest that when bond yields and rates rise, sooner or later equities will fall.

If pressure on sovereign yields grows and central banks follow with further rate rises, the technical bid for equities weakens. For this bull market to sustain, it will need to buck trends that have long seemed set in stone.

If this is combined with weakness in the bid for AI names and a possible slowdown in hyperscaler capex plans, the good times could end quickly.

“When we speak to issuers, we encourage them to go now,” said a third ECM banker. “There is plenty of uncertainty in the market and, if you wait, you might miss your window. Equities are at record levels, and the cost of equity is incredibly attractive.”

“The surge in follow on activity has occurred despite several bouts of volatility this year, including the Iran conflict, disruption around the Strait of Hormuz, interest-rate uncertainty and periodic technology-sector sell-offs linked to concerns over the pace and sustainability of AI investment.” Yet all these are turning the screw on sovereign and corporate bonds. Could stock markets be next to feel the chill?

While conditions remain this good, sellers would be mad not to take advantage.