FOCUS 27
WITH A LONG PIPELINE OF POTENTIAL IPOS AND A NUMBER OF RETAILERS ALREADY LISTED, DISTINCTIVE BRANDS AND MARKET POSITION, AS WELL AS A COMPELLING EQUITY STORY, HAVE BEEN PREREQUISITES FOR WINNING THE BACKING OF INSTITUTIONAL AND OTHER INVESTORS.
How to court capital
With its collection of well-known, high street brands, and potential for strong returns, the retail sector has proved attractive to investors in the past. This familiarity also intensifi es the media glare, with the recent collapse of several household names providing a warning of inherent volatility.
With a long pipeline of potential IPOs and a number of retailers already listed, distinctive brands and market position, as well as a compelling equity story have been the pre- requisites for winning the backing of institutional and other investors. This will be especially true if those investors are ‘stock pickers’ that have the luxury of investing across the stock market and are not bound by sector allocation.
While potential shareholders will focus on the fundamentals of retail (strong multi-channel, clear property management strategy and a proven fi nancialtrack record), the relative performance and sub-sector positioning are equally important in achieving suffi cient investor demand.
Are you ready for scrutiny?
Without a strong business rationale, any attempt to take the company public may be perceived as merely opportunistic. Thorough preparation is therefore critical to achieve an acceptable outcome. Preparing for an IPO can be a once-in-a-lifetime experience that is both expensive and time-consuming. In addition to courting investors, management may have to oversee changes to its IT and accounting systems and ensure reporting processes are up to the demands of a PLC.
Once listed, a company must communicate regularly and openly with a much broader range of stakeholders (investors, analysts and regulators) and will be subject to far greater scrutiny.
Almost overnight, issues such as risk management, corporate governance, tax strategy and sustainability may attain far greater importance. While new non-executives on the board may fi ll some of the skills gaps, this would not address any development needed at the operational management level. New shareholders’ objectives may be at odds with those of the previous owners, so in the run-up to the IPO, the board has to exert greater control, such that it feels able to deliver on its IPO promises.
The level of change and the risk of potentially confl icting priorities mean that owners and management should continually challenge themselves throughout the IPO process as to whether the decision to fl oat is the right one. Sourcing unbiased third-party advice before any decision is made is crucial, and will remain so throughout the process.
© 2014 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative, a Swiss entity. All rights reserved.
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