28 finance
Creating a road map to the public market
In today's market we are seeing an increase in the need for advisers who truly understand growing businesses who have ambitions to enter the public market. There were 95 admissions to AIM in 2014, raising £5.9 billion capital*, the highest number since 2007, writes Tracey James, partner, assurance at Grant Thornton UK LLP
As advisers to dynamic businesses we have taken many businesses through the hurdles which undergoing a listing or grooming for an exit encompasses, and there are important considerations when embarking on this journey.
IPO as a strategy for growth
We are seeing strong interest from shareholders, boards and (increasingly) private equity alike in considering an IPO as one of the strategic options.
Case study – Gamma Communications
Gamma Communications plc is a rapidly growing, technology-based provider of communications services to the UK business market. Gamma’s services are designed to meet the increasingly complex voice, data and mobility requirements of businesses, through the exploitation of its know- how and own intellectual property.
Growth in the business and the opportunity to create value for shareholders led Gamma to seek admission to AIM in 2014. On admission in October 2014, Gamma had a market capitalisation of £165 million and since coming to market, Gamma has seen a significant increase in its market capitalisation.
Grant Thornton was chosen as adviser to Gamma, as a result of the relationship built over a number of years. Andrew Belshaw, Gamma's finance director, added: "We first engaged with the Grant Thornton reporting accountant team some time ago when we first considered an IPO process. By the time we decided to proceed, they used the knowledge they had already gained to quickly and efficiently complete their due diligence reports and carry out their working capital review, such that their work stream was always ahead of the game. They kept this momentum going when the financials had to be updated and through to completion."
The importance of understanding your business
We believe any float candidate should be thoroughly understood as a business by its advisers. By this, we don't just mean understanding the pure financials as they are historically; as advisers we need to get to grips with the ambitions of the business and where it wants to be in five years' time.
Experienced management team
The experience that you have within the proposed management team will be a key driver of the success of the business when deciding
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on carrying out an IPO. This may also include appointing non-executives with experience of implementing a growth strategy in previous floats. Having an experienced management team and non-exec board is a critical success factor that should be highly regarded by any business listing on AIM.
Expanding as an international organisation
Many organisations who are considering creating significant value in anticipation of a float may be considering building up a track record of international growth which could make their proposition more compelling for future investors. UK companies have occasionally failed to replicate UK success overseas merely because of inexperience of new territories making it important to seek advice from an adviser who really understands that market and what it means to the business and its future growth.
Should you float?
So does the activity mean we are back in bull markets and it’s time to float your business? Well, it’s a huge decision to go public and probably one of the most significant decisions a business may ever take. The preparation and process to list will be time-consuming and hard work; meanwhile, management and shareholders may need to instigate big changes to meet the challenges of being a public company.
IPO potential benefits
The London public markets provide unparalleled access to capital for growth – both at IPO and through further capital raisings at a later date. Listed companies will receive comprehensive analyst and media coverage, plus coming to market can reassure customers and suppliers that the company has received regulatory approval and has undergone a rigorous due diligence process.
IPO potential challenges
On the flip side, living life in the public eye can prove onerous and uncomfortable. Bad news as well as good news has to be shared with the market, and share prices can experience a marked impact from a drop in trading or the loss of a major customer.
Financial reporting needs to be concluded within shorter timelines than management may be used to and corporate governance becomes hugely important.
THE BUSINESS MAGAZINE – THAMES VALLEY – APRIL 2015 Next steps
There are many advantages and disadvantages to floating your company and thorough analysis, working with experienced and supportive advisers, will help determine the right route to achieve your company's goals.
Often businesses underestimate the time involved in getting the business ready for an IPO. Pinkesh Patel, associate director in Grant Thornton’s Thames Valley listed company team, comments: “When an IPO is being considered there is a lot to think about in making that transition from a private to public company, including; preparedness from a commercial and corporate governance perspective, sophistication of finance function, corporate structure, board incentivisation and, importantly, choosing the right nominated adviser and broker; depending on the stage the business is at, the sector and how much they want to raise."
Should your company be considering entry into the public market, contact a member of our Thames Valley listed company specialist team.
Details:
Tracey James, partner 01865-799953
tracey.d.james@uk.gt.com
Nick Watson, partner 0118-9559221
nick.j.watson@uk.gt.com
Chris Mundy, partner 01865-799851
chris.m.mundy@
uk.gt.com
Pinkesh Patel, associate director 01865-799907
pinkesh.patel@
uk.gt.com
For more details see: Capital markets –
http://bit.ly/1GnCBf9
* source: AiM Market Factsheet. London Stock Exchange, (January 2015):
www.londonstockexchange.com. AIM Market statistics is located within the statistics section.
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