Government efforts to save the London Stock Exchange are “too small” and listed firms are being hamstrung by unnecessary red tape in the market, the boss of newly delisted asset manager Gresham House has warned.
Speaking with City A.M. after leaving the market via a private equity buy-out last year, Gresham House chief Tony Dalwood said there was a “future” for the public markets in London but watchdogs should focus on easing the regulatory burden on companies rather than adding more rules.
“There is no doubt there can be a future for the London equity market, [but] it does need to recognise and answer the questions as to why the number of companies on the London Stock Exchange has halved in the last 10 to 15 years,” Dalwood said.
“Instead of adding more regulation and trying to put temporary solutions in place, they should look holistically – there are so many components that can be improved.”
Dalwood pointed to the City’s view on executive pay as one area hampering the appeal of the public markets and urged companies and regulators to “look at America” as a model for success.
London should be “rewarding talent rather than shooting talent for success” in terms of pay and scrapping restrictions to areas like a nine-year limit on the tenure of board members, which were forcing firms into unnecessary change, Dalwood said.
“Those sorts of constraints are just thrown in, and then assumed to add value by people who not always run businesses and [do] not always have skin in the game”, he said, adding that current reform efforts were “too small” to make a meaningful difference.
The comments came as the forestry-to-equities investor reported its first set of results since leaving the market in a £470m takeover by US private equity firm Searchlight last year.
Assets under management rose by eight per cent to £8.5bn at the end of December 2023, and adjusted earnings grew to £36m. Gresham is now targeting £20bn in assets under management by 2030, according to a ten-year plan dubbed GH30.
Dalwood, who has led the firm since 2015 after leading a management buy-in, has transformed the 167-year-old firm by pumping cash into assets like natural capital and bolstering its UK equity practice.
Despite his criticism of the regulation of listed firms, Dalwood said the takeover last year showed Gresham House was a “success story for the public markets”.
“The public markets are there to attract capital into growing businesses and to provide that capital and then support them to grow,” he added. “For 10 years, since I led the management buy-in, we went from a £12m market cap business to a just-under £500m business.”
Searchlight’s offer came in at 63 per cent of its then price on the London Stock Exchange.
However, his comments point to the troubles facing the market after a slew of recent takeovers. Cybersecurity firm Darktrace became the latest company to agree to a take-private last week when it waved through a £4.3bn deal from US private equity firm Thoma Bravo.
Over £60bn worth of companies have now exited the market or revealed plans to leave this year, according to data from the investment bank Peel Hunt.
