34 corporate finance
companies The Government has announced a new IPO route to the UK stock market for entrepreneurs and high- growth companies in association with the London Stock Exchange. James Klein of Penningtons Solicitors LLP examines the proposals
These measures are aimed at international (mainly European) mid-sized high-growth companies, particularly within the internet and technology sectors, which are seeking to list on the UK’s public markets in order to expand and fund dynamic, fast- growing businesses and meet the needs of their investors.
The Government has indicated that the proposals are likely to include reformed rules on free float (currently, at least 25% of the shares of a company applying for a premium listing must be held by the public in one or more EEA states at the time of listing), listing eligibility criteria and reporting requirements. The new proposals will sit alongside the FSA’s ongoing consultation on wider issues relating to the UK listing regime. Further details are expected to be published before the end of 2012, and it is likely that a consultation period will follow.
The aim of these proposals is to make the UK the most globally attractive and competitive marketplace to set up, run and develop a business. By attracting high-growth companies to list their shares in the UK, the Government will stimulate growth in the UK economy and generate jobs for the British public. The new route will complement the UK’s existing markets and entice investors looking to fund early-stage technology companies who wish to make the UK their global base.
It forms part of an overall
objective for the Government to reduce regulatory burdens for investors and make equity capital more available for British and international businesses. The proposals mirror president Barack Obama’s JOBS Act, which sought to cut red tape for small companies going public on the US markets.
www.businessmag.co.uk
New IPO route for high-growth
Should I consider an MBO?
For the past three to four years, owners of businesses have delayed selling their companies hoping that valuations will pick up and banks will begin to lend again as currently, in the majority of cases, this is not happening, writes Chris Duggan of Griffins
The Government envisages that ‘young’ tech companies will now be more likely to list their shares on the UK public markets rather than seek to finance their rapid expansion in the US. We may not see any discernible change until market conditions improve but the proposals of more relaxed eligibility requirements and less onerous rules on free float combined with the reassurance of the governance framework offered by a listing on the main market will surely be an attractive proposition to many early-stage tech companies.
James Klein (partner) is head of the technology group at Penningtons and also head of the London corporate team.
Details: James Klein 020-7457-3207
james.klein@penningtons.co.uk www.penningtons.co.uk
Some business owners have reached or even passed 60 years of age, their pensions have matured and they are now thinking again of selling up and retiring but are finding it incredibly difficult. They may have already tried using a business agent, paying a fee in advance which can easily amount to £30-40k based on an excessive valuation. Unsurprisingly, the business does not sell. So what do these captive business owners do? Usually a new managing director is put in charge to run the business or it is sold to the existing management team.
The question is then “to MBO or not to MBO?”
Reasons for an MBO
• The process is within your control with no surprises
• Most businesses that have directors/owners over 60 years of age will have significant balance sheet values which can be released.
• You can remain involved in some capacity and perhaps benefit from a third-party sale in a few years.
• You can be more confident that you will receive any outstanding deferred payment.
• Finally, you can retire and, in some cases, walk away without any future commitments.
THE BUSINESS MAGAZINE – THAMES VALLEY – DECEMBER 12/JANUARY 13 Reasons against an MBO
• You will almost certainly under sell the value of the company.
• You will also probably be paid over a longer period of time than if a third party purchased the business.
• The business itself may become more highly geared as it takes on additional borrowing or reduces its reserves to fund the MBO and this can put future deferred payments at risk.
• The management team may have been with the company for years but are not entrepreneurs or natural leaders so future company performance may be impacted.
• The management team may personally have to find additional funding and therefore they will have to draw additional remuneration from the company, again impacting on future profitability.
An important point is to get the right advice before you start the process. I have recently been involved in a number of MBOs so if you are an owner of a business or a management team contemplating a buyout please contact me for a free initial consultation. In the right circumstances, this exercise can work.
Details: Chris Duggan 0118-9235020
c.duggan@griffins.co.uk www.griffins.co.uk
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