Small Talk: Merchant bank minnows mulling mid-cap merger

Robert W Baird, the UK arm of the US investment banking and private-equity group Baird, is believed to be holding talks with the niche investment bank Bridgewell Securities, which was bought out of Singer & Friedlander by Ian Dighé and Giles Elliott in 2001 and has been growing like Topsy ever since.

The world of small- and mid-cap broking and corporate finance is ripe for consolidation, and a combination of these two would appear to make sense. Baird has some strong business relationships in specialist sectors including support services and life sciences, but remains a relatively small player. Bridgewell meanwhile has outgrown its small-cap roots. It has grown to more than 70 staff and begun acting on bigger and bigger deals. It was recently appointed joint broker to Bellway, the housebuilder, and underwrote the construction firm John Laing's £100m rights issue.

The structure of the rumoured deal remains unclear - and highly sensitive. Bridgewell's management, now headed by the executive chairman Bob Benton, is highly ambitious. It would be a shock if they were selling out. And what is Baird up to? Is it giving up on the UK venture it began bulking up back in 2000, and selling it to Bridgewell? Or is it buying Bridgewell to give it the step up in the UK that it has really wanted all along? Plenty for the gossips to get their teeth into.

Inflexion point

Something afoot at Inflexion, a £36m private equity management company which is quoted on AIM. The company is 59 per cent-owned by London Merchant Securities, a FTSE 250 property company with a lucrative sideline. As well as its portfolio of long-term property holdings, LMS also has a portfolio of private equity-style investments.

LMS is a regular investor in technology, life sciences and oil industry services companies, and it took control of Inflexion last year to get hold of the little company's expertise in backing medium-sized management buyouts. Now Inflexion could be the cure for a looming headache.

Property companies are expected to become investment trusts, or Reits, when the Government legislates for the new scheme soon. Reits will have strong tax advantages, but LMS's investment portfolio will not be allowed into the trust.

One solution under consideration is the injection of LMS's entire investment portfolio - worth £220m at the last count - into Inflexion, with some of LMS's portfolio managers moving into executive posts at the little company at the same time. It would transform Inflexion overnight, and although a final decision is not likely until the advent of Reits draws nearer, Inflexion shares look an interesting punt.

Autumn collection

Small Talk's canvass of brokers reveals a strong pipeline of companies to float this autumn, with most saying it could be as busy as this time last year. Interest is so far being buoyed by the soaring stock market, although many brokers expressed scepticism that the gains can be held. Expect a big push to get the floats out as soon as possible.

Just today, there is news of a late leap on to the internet gaming bandwagon (Fairground Gaming says it is coming to AIM with an £8m war chest to consolidate the online gaming sector), an intention to float notice from a laser company (see picture story), and the arrival of Concorde Oil & Gas, a cash shell raising £190,000 on Ofex to invest in or acquire operational oil and gas assets in Russia.

Most substantial of all, CareTech will say today that it plans a flotation that values this operator of 61 long-term care homes for people with learning difficulties at £50m-£60m. The founders, brothers Farouq and Haroon Sheikh, are cashing in £12m between them, and the company is also raising £10m for expansion.

IP2(almost)IPO

The latest spin-out from the hyperactive intellectual property company IP2IPO has suffered a last-minute glitch, delaying today's planned float of Getech - a profitable business based at Leeds University which compiles and analyses gravity and magnetic data to help oil and mineral explorers find what they are looking for. It is raising £2.5m at 39p per share, and management is selling £500,000.

Insiders say the glitch is a "paperwork" issue that oughtn't delay the float beyond the middle of the week.

SPI Lasers rings the changes for AIM float

Boffins from Southampton University had hoped to get rich from the telecoms boom of 2000 with their work on optical fibre, forming Southampton Photonics to make telecoms components. But the collapse of that market meant a change of plan and now the company, renamed SPI Lasers, is coming to AIM having developed a range of optical fibre-based lasers used in range of manufacturing industries. These are more accurate and energy efficient than traditional lasers, the company says, because "all key components are contained within optical fibres, enabling laser light generation and delivery to be carried to the manufacturing work area in a single fibre the size of a human hair".

Panmure Gordon is the broker trying to raise SPI £12m, money to invest in developing higher-power lasers and expanding its marketing. The likely value of the company is £30m.