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Embarking on an initial public offering (IPO) is a big step for any company. Obtaining a listing can bring many benefits, from fulfilling the company’s need for capital to enhancing its public image. IPOs are also sometimes used as an exit strategy for startups, as an alternative to selling the business.
Many treasurers will progress through their careers without ever being involved in an IPO. But when an IPO does take place, the treasurer may have the opportunity to play an important role in the process. “Every IPO benefits from having a primary point person,” says Adam Farlow, Partner and Head of Capital Markets, Europe, Middle East & Africa at Baker McKenzie. “The treasurer is often the perfect person for that – someone inside the company who knows where to find information and to pull together the right internal team.”
Roger Lamont, Treasury Advisory Services Director at Deloitte, says that treasurers are key to an IPO for three main reasons. “They play an important role in the process, both by raising cheaper debt and using their investor relationship skills,” he explains. “Post IPO, they can also avoid shocks by managing the financial risks in the group properly.”
Making the most of the treasurer’s skills
No two deals are alike, and the treasurer’s role in an IPO will depend on a number of different factors. “It varies tremendously from deal to deal, much as the role itself varies from company to company,” says Farlow. “In some deals, we virtually never see the treasurer. In others, they are driving the process – and these invariably have a smoother execution.”
For Daniel Jefferies, a timely move to take up the role of Group Treasurer at Equiniti in May 2015 meant that he was involved from an early stage in planning for the company’s IPO later that year.
“I came to Equiniti at a reasonably early stage in their decision-making process,” he explains. “It’s not uncommon in that scenario for an organisation to evaluate a number of different tactical and strategic options – so it might be a trade sale, it might be a merger, it might be another private equity sponsor, or it might be the IPO route.”
Once the decision had been made to go up the IPO route, Jefferies’ focus shifted to the debt structure of the deal. “Obviously an IPO is an equity raise,” he says. “You’re normally raising equity to allow an owner to exit or reduce a holding. But there is commonly a debt component as well – and it was the debt component where the bulk of my attention was focused.”
Navigating the challenges
An IPO is not without its challenges. Farlow says that the single most important item is not to underestimate the amount of work involved in the process. “Good company counsel and underwriters can do a lot to help manage the process,” he says. “But ultimately, this is the company’s story that has to be told in the way the company wants to tell it.”
In the case of Equiniti’s IPO, Jefferies says that as the company was moving from a high yield structure to a pure bank deal, the company’s presence in the bank market was limited, making the IPO process more complicated than in a typical refinancing deal.
The work involved in an IPO doesn’t stop once the IPO itself has taken place. Jefferies emphasises the importance of getting a deal in place that will be right for the company going forward. He notes that in any financing deal, the most difficult part is delivering on the numbers after the financing has actually been secured.
For Equiniti, the success of the process was demonstrated when the company undertook a debt raise as part of the rights offer process. “The uptake on our deal has been very encouraging, both with existing members and new members,” says Jefferies. “I would say that’s due to the hard work the company has put in over that period.”
