The return of the IPO
The new year might still be in its infancy but one of the financial world’s big predictions is already starting to become reality – that 2014 will see the return of the IPO.
In fact, according to recent figures from Dealogic, last month was the highest January on record in terms of EMEA IPO volume, with a total value of £1.8bn across six deals (almost doubling January 2013’s volume of £960m across four deals).
This doesn’t look like it will be an anomaly or an early peak. Against the backdrop of an improving economy and a growing confidence in the City, the IPO is set to make a big comeback with the likes of Game Group, Poundland and Zoopla poised to go public this year. Indeed, it is thought that the UK may well emerge as the leader of the revival, establishing itself once more as an attractive destination for foreign investors.
However, the IPO resurgence is not just confined to this side of the Atlantic. Recent data collected by Thomson Reuters and the NVCA showed that, in the US, the fourth quarter of 2013 saw 24 venture-backed companies make their initial public offerings, collectively raising $5.3 billion. This represented the third consecutive quarter with more than 20 VC-backed IPOs, making 2013 the best year for new listings since 2007.
So, with going public back in fashion, many business leaders formulating an exit strategy will find that flotation is now back on the agenda. Whilst it is not a route that suits all companies, many fast-growing ventures find that an IPO can raise the capital they need to accelerate growth and advance their position in the market.
For any business considering this option, early preparation is vital; and key to this preparation is getting a strong, experienced leadership team in place.
According to Ernst & Young’s Guide to Going Public, investors base, on average, 40% of their IPO investment decisions on non-financial factors – especially the quality of the management.
Assembling an exceptional leadership team is one of the most important pre-IPO measures and is a matter that should be addressed at least 9-12 months in advance. Finding, selecting and appointing world-class executives who bring both public company experience and deep sector knowledge will help to secure a smooth flotation and ongoing organisational attainment.
Special attention must be paid to the roles of Chairman, CEO and CFO as shareholders will look to these individuals in particular when seeking answers, assurance and insight. However, it makes sense to ensure that public-company skills are present throughout the organisation’s functions, whether this is a case of developing existing employees or bringing in new team members who possess this experience.
When planning an IPO, the need for greater corporate governance becomes an increasingly pressing issue. With that in mind, it is not only the enhancement of the executive board that must be looked at. Pre-IPO ventures will also need to appoint non-executive board members who can chair the audit and remuneration committees; and City audiences will want to see credible individuals in these positions. Three non-executive appointments is typically the minimum.
The advantages of assembling the right executive and non-executive teams as early as possible are obvious. It allows time for the board to gel, relationships to form, weak links to be replaced and ensures that a unified leadership team is presented to investors. However, there is also an argument for maintaining a flexible approach to pre-IPO recruitment as, the closer and more certain the flotation becomes, the more attractive a proposition is created. A truly compelling opportunity is vital currency when it comes to securing the services of world-class talent.
Whilst there are strong signs that market confidence is returning and that 2014 will be a bumper year for the IPO, it remains crucial that businesses coming to market are led by outstanding boards. Investors still seek the reassurance of seeing cohesive leadership teams that offer experience, stability and the talent to go beyond the IPO, building an organisation that excels at public life.
Intramezzo’s own talent network comprises c.400 C-level executives with IPO experience that are available to work on a full time, part time or interim basis. For more information or a free consultation on assembling the right team for an IPO, please contact us on +44 (0) 20 7520 9290