Why IPO/ECM Advisory?
The IPO/equity process is a black box - many of the elements are totally opaque to issuers
The IPO/equity process is a black box - many of the elements are totally opaque to issuers
The IPO/equity process is a black box - many of the elements are totally opaque to issuers
- Banks serve both issuers and investors - Who is really the client and in what areas can issuers exercise control efficiently and intelligently?
- Bank and research qualifications - What variables really matter? How best to manage potentially conflicting mandates?
- Fees, incentives and syndicate structure - What's possible, what works and what doesn't?
- Research analyst views and process - How should companies interact with the research analysts to create transparency?
- Investor targeting - Who are the right investors and why? How should companies market to them and get real feedback? How should deals be allocated?
- Pricing and trading - How and why do IPO's price the way they do? What do investors expect in terms of aftermarket trading and returns? What role do the syndicate captains play, and what's the best way to work with them?
What typically goes wrong and why?
The IPO/equity process is a black box - many of the elements are totally opaque to issuers
The IPO/equity process is a black box - many of the elements are totally opaque to issuers
- Unrealistic advice regarding valuation, transaction sizing, market conditions and potential investor demand can lead to failed deals
- Companies often waste significant time and money by starting formal IPO processes before being truly IPO ready
- Poorly structured syndicates can actually demotivate the banks and reduce accountability. More isn't always more
- Poorly run research analyst education processes can lead to major disconnects on company projections, comparable companies and multiples that harm valuation and trading
- IPO execution often suffers from significant coordination problems among multiple parties, lack of senior participation, and insufficient focus on pre-IPO investor targeting and meetings
- Huge information asymmetries exist between the issuer and the banks, especially during the critical roadshow, bookbuilding, and pricing/allocation phases
IPO/ECM Advisory Mitigates Risk and Improves Outcomes
Proper preparation prevents wasting valuable time and resources
- Being IPO ready is about much more than drafting a prospectus. Can you project your growth accurately? Have you developed and aligned your internal corporate functions appropriately to support the rigors of investor interaction, public market reporting and SEC regulation? Who are the right banks to work with and what are the best syndicate and fee structures to motivate successful results?
- Best practices include addressing all of these topics and more thoroughly before kicking things off. Having someone on your side who has been through the process many times as a banker, advisor and a corporate executive can help drive efficiencies, reduce wasted effort and position you for success.
Creating transparency on key issues up front avoids disaster later
- One key to a successful transaction is setting realistic expectations at the outset on critical topics like valuation, timing, market conditions, and investor sentiment, which then empowers the banks to deliver on what they promise.
- Too often, a company ends up "taking a deal" at the end in a process that they never would have started if that were the anticipated outcome. Only an independent IPO/ECM advisor can help drive the transparency necessary to ensure that the "thrill of victory" doesn't feel more like the "agony of defeat."
Knowing market practice helps the issuer make better decisions
- In a complex, fast-paced equity deal, management teams often don't understand who is doing what, why certain things are the way they are, let alone realize what elements of the process they can control or impact.
- With an experienced IPO/ECM advisor looking out for your interests, you remain in control of the process and the outcome.
Bumps in the road are inevitable - being able to navigate them is key
- While IPO and equity processes can be quite non-linear, the problems thay may occur and can derail a transaction often follow regular patterns.
- Many questions all have to be addressed in the right way to prevent mistakes that could be fatal to a deal: were clear expectations set up front, does the company understand what levels of disclosure are required to attract investors, can the company consistently project its results, is the banking group aligned, have the research analysts been properly managed and educated, are you marketing to the right investors, does the market environment support launching, is the valuation appropriate? And much more...
- When you work with an advisor like RawlOccam who has done this many times before, the issuer benefits from that experience in terms of mitigating risk and achieving success.
Knowing the key senior ECM personnel on Wall Street adds value
- Having strong relationships with important senior ECM and syndicate officers at the most relevant banks can help create trust and commitment for your transaction and can make the difference at times between success and failure in choppy, unpredictable markets.
- At RawlsOccam, we have been working in the equity capital markets sector in New York for over 25 years. Many of the folks we did our first deals with now run the capital markets desks or investment banking groups across the Street. When you need answers on a difficult question, when you want an honest read on where the market is, or when you want to know if a bank is really going to get it done, these are the senior folks above the sector teams that you want to be able to call.