The IPO market is in something of a down cycle right now. When do you think activity is likely to pick up?
Aron Izower: While the market hasn’t been poor across the board, it does reflect that there has been less appetite for new investment and new issuance. However, the early summer saw a pick-up in the IPO market and, by the end of Q3, IPO volume was up compared to the same period last year. Our clients and the banks are expecting a gradual loosening of the market and the ability for a wider range of companies to come back in with more appetite for new issuance.
How has the recent volatility altered company strategies for IPOs?
AI: Elements such as pricing, shareholder return policies and operational improvements have all changed as a result of the volatility. Survey respondents who said they haven’t made a change in strategy were probably already positioning their business to either do an IPO, look at another type of financing or potentially divest. They were probably already looking at a transformative type of transaction, so there may not have been much of a need for them to change what they were doing.
Companies that said the volatility in the market hadn’t changed their business other than in respect of the IPO’s timing may be now looking at alternative financing, either through a strategic partnership or through a private non-registered sale of securities. That an IPO may not be as achievable in the short term may have really led them to take a more serious look at cutting costs, reducing expenditures and running a leaner ship.
What do you think companies need to be doing to ensure that they can really strike while the iron is hot?
AI: They should make sure they have fairly solidly prepared things with a very long lead time including tax planning. Companies should also prepare their financial statements in advance – this is especially pertinent for companies that were formed from a carve-out or which have not traditionally had a need for very good financial controls and reporting.
Also, decision makers need to make sure that the company knows its story and that it’s a story that resonates with investors and partners. That includes getting the right advisors who can work with the company to get the various governance documents right and work with them to plan communications or issues.
Having the right investor relations person can also help shape the story and give you an understanding of what’s playing in the market and how your story might be received and might be improved.