Should I go public? The benefits of raising capital and developing your business on a Growth Market

Entrepreneurs explain the ins-and-outs of an IPO

As the UK economy continues to show signs of recovery, increasing numbers of small and medium-sized companies are looking to raise capital through the sale of equity on a stock exchange to develop their businesses.

Joining a public market is a major decision for any company. There are many reasons why companies might consider going public: enhance the credibility, status and visibility of a company, instil discipline and transparency, perhaps to put in place a stock options scheme for employees, or to gain an independent valuation of the business. Most likely, it will be to raise capital to grow the business.

A free seminar on IPOs on 25 February, hosted by ICAP Securities and Derivatives Exchange (ISDX), will be exploring the process of joining a public market in-depth. So we’ve asked some of the speakers – representatives from leading legal, corporate advisory and investor relations firms – to give a preview of some of the topics they will be discussing on the day and share their insights.

Pre-admission

Preparation. Preparation. Preparation.

Eran Zucker, Director at Peterhouse Corporate Finance, a leading ISDX Corporate Adviser, says that, as in most areas of business, a company that prepares thoroughly before seeking admission is most likely to succeed.

He says: “It’s a good idea to make sure that all your business records are up-to-date as these will be reviewed during your admission process. You will also need well presented financial projections and business plans so your adviser can assess the business and working capital requirements.”

Choosing the right corporate adviser is another important aspect of joining an exchange. A corporate adviser not only oversees the admission process but must be retained for the duration of a company’s time on market, so as well as choosing an adviser suitable for your business requirements, you and your team want to develop a good working relationship with them.

Zucker continues: “Corporate advisers have experience in bringing a wide range of companies to market with differing needs and aspirations. Working with your adviser is a partnership and we are here to provide guidance and offer practical support. Listen to your adviser’s recommendations and be prepared to accept their advice.”

It is also worth noting that senior management will need to dedicate time to the flotation process, so it is a good idea to plan ahead for this.

“If I can offer a company one piece of advice it is not to underestimate the time commitment in the early stages of this process. The best way to mitigate this is to prepare and plan and to be as organised as possible. It might sound daunting but your advisers will be there to help.”

 

   

Legal considerations

Getting it right

Employing experienced legal practitioners throughout the flotation process is vitally important. They are a key resource in the joining process and can offer valuable expert advice.

Your lawyer must advise the company and its directors on their responsibilities and obligations when joining a public market.

David Bennett, Partner at law firm Marriot Harrison says: “It is the role of the lawyer to ensure that a company’s application process progresses effectively and efficiently, which includes making sure that the company and its directors understand what they need to do and why. I would recommend taking full advantage of your solicitor’s experience to ensure a smooth admission process.”

Lawyers will advise on preparation of the admission document and help the company and directors verify it to ensure that each statement is accurate. Your lawyer will also undertake due diligence into key aspects of the business on behalf of the corporate adviser to generate confidence that the company is appropriate to join a public market.

Bennett concludes,

 “Your lawyer is critical to getting your transaction away.  Choose a lawyer with experience and who relates to what you want to achieve so that the legal process can be as stream lined as possible.”

 

Investor relations

Making the most of your quotation

Making the most of your time on market requires time and dedication, including the ability to articulate your company’s story through a well planned programme of investor relations.

Richard Davies, Managing Director at Richard Davies Investor Relations says creating stand out in the equity markets through considered investor relations is important to attract the right mix of investment.

He says: “Companies should consider marketing their equity in the same way as they market their products and services. During these more risk-averse times with lower than historical trading volumes looking set to continue for some time, companies need to shout twice as loudly to get themselves heard in a crowded market-place.”

Davies also recommends taking the time to build a sound understanding of what an investor is looking for and the way the company’s shares will be traded.

“It is vital that companies coming to a public exchange have a good understanding of the way their shares are bought and traded; how they should communicate to the market (investors and non-investors) and how they should handle their advisors to get the most out of the relationship. Good Investor Relations is about understanding the opportunities that the market offers and being pro-active in reaching out to the investor community. Advisors are there to be used as an information resource but it is important that companies use their own resources to manage their share register.”

 

 

This article is brought to you in partnership with ISDX