IPO/Dual Track

Introduction to IPO

The decision to float on a public market is a seminal event in the lifecycle of a business and one which marks the beginning of a new journey. From the very start there are a number of important decisions to be made with respect to the advisory team, timing, structure and market. We have compiled a guide that provides a useful insight into these decisions and how the process works which can be viewed and downloaded at the bottom of this page.

An IPO is the first sale of a company’s shares to the public and the listing of the shares on a stock exchange. A public share issuance allows a company to raise capital from public investors by creating newly issued shares or selling existing ones. While raising capital tends to be the primary reason for an IPO, there are a plethora of other options for utilising an IPO as a strategic option including seeking opportunities for growth, value creation or an exit strategy. A variety of situations and motivations can result in preliminary IPO discussions.

The IPO process places a significant amount of strain on the executive management as you are required not only to continue running your business successfully but make decisions on the IPO process whilst being subject to a rigorous due diligence process. The team at finnCap has many years of experience and has collectively acted on hundreds of IPOs. We will ensure that at every stage you have the time and advice to deal correctly with the issues that arise. For us an IPO is a partnership not just for the IPO but for what we hope will be many successful years afterwards as a quoted company.

The IPO process starts with an in-depth analysis of the merits of a flotation, also considering the alternative solutions and how best to use the capital raised. With the ability to offer an IPO, trade sale process or indeed a dual track, finnCap is well placed to advise on the best path for the company to take and will always provide the management team with the right advice for its business.

It is important to take a step back and evaluate your company and its future potential from an investor’s perspective by establishing a strong equity story. The equity story must be supported by consistent historical financial information, demonstrating the trends underpinning the equity story consistent with management’s business plan. Investors are looking for companies with business models that have a solid track record of growth and have an actionable strategy to sustain this growth. Market sentiment varies by sector and appetite for your equity story will depend on the performance of listed peers and the underlying market drivers at the time. The bottom line is that a company’s IPO valuation will be highly dependent on market conditions, the company’s individual equity story and the investors’ confidence in your management team. Our free valuation tool at the top of this page will provide you with an indicative valuation range which will be supported by a further conversation with a member of the finnCap team.

There are many situations when companies start to consider an IPO as a strategic milestone in the company’s lifecycle. An IPO can provide the next step in your company's development, providing access to capital markets investment, increased liquidity and profile.

Other situations include:

  • Fund significant acquisition
  • Pressure from PE/VC investors to realise investment
  • Consolidation trends within the industry
  • Succession planning and to separate management and ownership
  • Carve out and partial or full exit from individual business units
  • Competitors have IPO’d with success
  • First mover and innovator advantage

Companies need to objectively assess the benefits of going public against the potential setbacks, considering the effects of an IPO on the company and shareholders’ objectives. An IPO should never be viewed primarily as an opportunity to exit. It needs to be because it’s the right step in the path on which you’re guiding your company.

Pros

Access to capital to facilitate growth  

  • Fund growth and expansion of your business by offering a wider range of sources to raise capital
  • Further capital raising opportunities at a later date
  • Finance key acquisitions, using the company’s paper as a liquid M&A currency
  • Retire existing debt
  • Buy out existing shareholders
  • Invest in research and development
  • Move into larger and more diverse markets

Liquidity and broadening of the shareholder base

  • Create a market for your company’s shares
  • Potential for existing investors to realise part of their investment (if they wish to do so) 
  • Broaden shareholder base to institutional funds through IPO offering 
  • Creates a market for company’s shares to trade freely between investors/market participants and establish your company’s valuation
  • Assist the recruitment, retention and incentivisation of key management and employees through equity incentive schemes

Maximising valuation

  • Research analyst would produce a report directing market on their view of valuation
  • Investors subsequently value the company       
  • IPO and trading prices reflect an ongoing and objective market valuation of the company driven by investor sentiment and view on valuation
  • Value can significantly increase post IPO if forecasts are met or exceeded

Increase Profile and brand awareness

  • A public listing will raise the profile of the Company materially
  • Greater overall visibility Enhances brand
  • International investor knowledge
  • Improve status and credibility with suppliers and customers

Incentivisation of key staff

  • More attractive proposition for key employees due to the ability to receive compensation in the form of listed shares
  • Ability to retain these key members of staff using long-term incentive plans

Cons

Increased demands on time and resources of management

  • The IPO process alone is time-intensive and requires significant management involvement at the expense of the day-to-day running of the business
  • Requirement for robust internal processes and controls and the ability to monitor and report KPIs on a timely basis
  • Directors of listed companies face additional legal and regulatory responsibilities. They will be responsible for any listing document prepared in connection with the listing on which investors will rely when purchasing shares.

Public ongoing reporting requirements

  • Greater transparency is required, which is labour-intensive and the information can be valuable to competitors
  • Strict compliance with corporate governance and disclosure standards required, including tighter reporting deadlines for your annual and interim reports and controlling shareholder requirements

Reduced control

  • Diluting equity ownership can reduce management control
  • Shareholders may obtain a bigger say in the management of the business as a number of corporate actions will require shareholder approval.

Costs

  • Upfront costs associated with the IPO process. Adviser costs include: bankers (Sponsor on Main Market, Nomad on AIM), broker commission, auditors, reporting accountant, lawyers, PR, registrar, printers and stock exchange admission fee
  • Ongoing compliance costs due to the increased requirements on legal and financial reporting

Thinking of an IPO for your business?

Read our expert guide below.

Download the IPO Guide 

We'd love to hear more about your growth plans, contact our corporate finance team below.

Can't decide whether to float or sell? Try Dual Track

Dual Track is a specialised finnCap Group service we offer to our clients, where we run the IPO and trade sale processes together. It gives business leaders the benefit of choice.

As your adviser, we can stay flexible throughout the process. There is no need for you to pick your path until you’ve made the decision that’s right for your business.

  • IPO and sale processes run in parallel

For us, Dual Track represents a big point of difference. There are few other financial advisory firms that offer Dual Track. There are fewer still that have on their team the same range of talent, able to fully explore both the outcomes of floating and selling with complete impartiality.

  • Award-winning public market expertise coupled with sell side expertise
  • Collegiate approach that puts the client’s interests first
  • Cost efficiency, impartiality and shared intelligence

Dual Track is provided for both private equity backed companies and entrepreneurs. Quite simply, it gives you options to explore a potential IPO, or future trade sale, when you might not have previously considered it.

finnCap Group leverages the respective exit expertise of finnCap Capital Markets and finnCap Cavendish, in equity fundraising, IPO advisory and sell side M&A processes to bring a near frictionless and impartial dual track process. By running the IPO and sale processes in parallel, we consolidate the costs of and time spent on each and ensure that your business is marketed as broadly as possible.

There are few other firms that can do this to the extent of our combined expertise. Ours is a collegiate approach, rather than two competitors vying for control, we are partners collaborating to achieve the best result for our client. Dual Track gives you the freedom to explore a future for your company you may not have even thought possible.

Latest Transactions

Parsley Box

Sector: Consumer
£83.8m IPO & £17m Placing
March 2021

Fonix Mobile Plc

Sector: Technology
£45m Placing and Admission to AIM
October 2020

Dye & Durham

Sector: Technology
CAD$172.5m fundraise on IPO to TSX
July 2020

For More Information

The finnCap IPO Guide

The finnCap IPO Guide

The decision to float on a public market is a seminal event in the lifecycle of a company. From the very start there are a number of important decisions to be made with respect to the advisory team, timing, structure and market. We hope that this guide will give you a useful insight into these decisions and how the process works.

Download the guide
Andrew Darley, Head of Technology Research

IPOs | In conversation with Andrew Darley

On why IPOs have benefitted the tech sector, finnCap Group Head of Technology Research Andrew Darley discusses Fonix's recent admission to AIM and why tech is thriving on AIM. Presented by Oli Barrett MBE

Watch the interview
IPO podcast

IPO outlook in 2021 | with Christopher Raggett

In this podcast, Christopher Raggett, Co-Head of Corporate Finance at finnCap Group shares his outlook on the IPO market in 2021, the companies likely to list, and the renewed ESG focus that's driving change.

Listen to the podcast
What is Dual Track? podcast

What is Dual Track?

Find out more in this podcast about Dual Track, a finnCap service offering that gives entrepreneurs more options when it comes to selling a business. At its heart, it combines two processes - preparing a company for sale and an IPO, which are run in tandem.

Listen to the podcast