09 May 2016

CU LAB: IPO basics: which financial advisers should we engage?

Of all the decisions a company makes along the IPO path, picking the right financial advisers is key to minimising execution risk and maximising results, as Stuart Byrne explains.

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A key initial decision to an IPO is which financial advisers should we engage ‒ and engaging the right financial advisers is key to maximising results and minimising execution risk.  So in terms of financial advisers, let's start with the investment banks or brokers.

The investment banks are key to any successful IPO process.  In addition to helping you price the deal, they give you guidance about where you're going to sell, finding the buyers of your product, and do many other jobs which are critical to the process, including helping draft the prospectus and getting involved in the due diligence committee processes, and in addition steering the process from start to end. 

The key to a smooth, successful IPO process when it comes to financial advisers is picking someone that you believe will be hands-on and fully engaged in the process from start to the end.  You don't want a bank that's just going to take a back seat and think that their only job is to find a few sellers at the end of the process.  You want a banker that's going to be in there, driving the process, steering the meetings, getting their hands dirty into the prospectus, and really taking your interests to heart and ensuring that your process is the centre of their attention.

Our experience is that not all investment bankers are equal.  You really want, when looking for your investment bankers, to choose an investment bank with recent sector experience, and a real understanding of your business, its dynamics and the industry that you work in.  You want a bank that has a track record of successful recent IPOs, that shows that they understand the pricing dynamics in this market.  And you want a bank with a team of staff who've got good experience in not only driving the process but, importantly, in preparing the documentation, the investor presentations and the prospectus.  That will be key at the back-end to ensuring that the process is smoothly designed to ensure that you can maximise the results when you go to the market.

We're also asked often about independent financial advisers.  And our market recently has seen a number of boutique advisers with good IPO and capital markets experience open up shop in Sydney and in the rest of Australia.  The independent financial advisers can perform a range of services, and it's very much a matter of personal preference as to what assistance you think you might need from an independent financial adviser.  The independent financial adviser can take a very high-level approach.  They can effectively hand-hold the directors, just as a sort of a check on what the other brokers are doing in the transaction.  Or they can be fully engaged, co-ordinating multiple joint lead managers, steering the process, running the committees, organising the meetings, stimulating all the discussion and to get the investment highlights out into the document and through to the market.  The investment advisers can perform a very valuable role on many processes.  They're not necessary for all of them and it's very much a matter of preference as to whether or not you think you will need a financial adviser to complement the support that your bankers are giving you.So summing up the decisions you need to make around your financial advisers:  the key message here is that IPOs are specialist transactions.  They're not transactions that every run of the mill banker or financial adviser will see coming across their desk every day of the week.  So it's critical you seek out and engage an investment bank and, if you want a financial adviser, a financial adviser with good, recent, successful market experience that can take you from the beginning of your process right through to the end.