IPO Training

IPO Course Content - Part One

Introduction to IPOs

• IPO and the corporate life cycle. When the time comes.
• Rationale for the transaction. Capital requirements, leverage and profitability. Reasons in favour, reasons against. Who should pull the trigger and when?
• Alternatives to going public. Secondary sales, M&A, Special Purpose Acquisition Vehicles, Direct Listings.
• Listing in the UK. Markets. Standard and Premium listing. AIM. International markets: NYSE, NASDAQ, Euronext. Pros and cons for each option. Suitability and market reach.

Case studies: Recent examples of IPOs and their listing choices

IPO Process (I). Awareness and Deal Dynamics

• This IPO training course looks at Regulatory Framework 101: The FCA and the LSE. Listing rules, MAR, DTR and governance. Corporate preparedness for regulatory scrutiny. The listing principles, continuing obligations. Considerations on the corporate price to pay for public capital.
• The preliminary work required to engage with an IPO process. Teams, policies and procedures, governance. Workload awareness and coming to terms with the step-change.
• Overview of the end-to-end process: The 14 steps.

IPO Process (II). Deciding and Engaging The Syndicate

• The decision to list. Capital requirement.
• The right fundamentals. Developing an attractive equity story. The shareholder mindset. Corporate governance and oversight requirements.
• The beauty contest. Who to invite? When to invite. Syndicate modus operandi. Conflicts of interest. The RFP: Contents and challenge. The commitment letters and their best-kept Underwriters. How investment banks decide their support of transactions.
• Selecting legal counsel. What to consider. How the lawyer will work for us. Speaking legal IPO language.
• Forming the syndicate. Dynamics and league tables. When to call the global coordinator. When to complete the syndicate. Retaining control of the IPO process. Impact of the company’s syndicate choice on the transaction dynamics and beyond. The different syndicate roles and who will accept what. Syndicate fees. How they are determined. Fixed and variable. The praecipium: what it is, how it works and consequences for the deal dynamics. The syndicate expectations regarding fee payment.

IPO process (III). Engaging Legal and Kick-Starting the Process

• Company fundamentals. Detecting management styles based on the company’s reporting. Adopting a market-friendly reporting style as we prepare to IPO. Market valuation: Drivers. Intrinsic vs Extrinsic models. Multiples based on industry. Buy-side/sell-side stakeholders’ modelling approach to complexity. Valuation dynamics between the company and investment banks. Negotiating middle ground: BATNA, ZOPA and the very necessary reservation point.
• Structure and content. Why they are important. What cannot be missed? Conflicts of interest, proprietary information, transaction leaks, the syndicate pulling out, and retaining model ownership. Avoiding typical NDA mistakes. When legal cover is not enough [commercial approach to NDAs].
• The kick-off meeting. Who is who? Taking ownership of the transaction. Setting the record straight from day one. Negotiating the calendar. Syndicate approach vs corporate approach. Being realistic. Comparing the investment bank teams vs the corporate teams (both in size and pay). The different workflows: Business, documentation, marketing and offering/pricing.

Team exercise: Identify IPO-friendly company reporting styles through analysis of fundamentals (basic approach)

IPO Course Content - Part Two

IPO Process (IV). Due Diligence and Document Drafting

• The syndicate due diligence process: what to expect and how to handle it. Syndicate DD vs private equity DD. What is the real purpose? Effective legal coverage. The importance of having documented policies and procedures when the DD time comes. VDRs.
• The document drafting process: The Underwriting Agreement (UA). Who should hold the pen and why? Caveats and pitfalls. When management realises the syndicate is not your friend.
• The prospectus: Content and drafting sequence. What investors really read. Approach to risk factors. When management realises legal counsel is your friend. The red herring.
• The company presentation: contents, length and style. How investors will look at the deal vs how management looks at the deal.
• The legal opinion. Main considerations. The comfort letter. Main considerations to consider from day one. The power of the auditor to make or break the deal (and they won’t care). Avoiding auditor issues.

Team exercise: DD answering role play using an actual bulge-bracket (BB) investment bank due diligence questionnaire.

Case study: Analysis of a real BB investment bank underwriting agreement.

IPO Process (V). Marketing The Transaction

• The roadshow. Who organises it? Syndicate vs independents. Who pays for it? Who should go, who must go? When investors want to shake hands. Where to go and why. Being realistic about market interest. Targeting sell side accounts. AAA reach. How many investors are enough investors? EMEA, US, Latam and APAC targeting. How to split the teams.
• The teach-in. What it is, when to do it. ‘The importance of being earnest’. How teach-ins fit in the sell-side morning call. Speaking the trading floor website: a necessary skill to teach management.
• Meeting with investors. Document handling. The chaperone role. Effective enforcement.

Case study: IPO roadshow presentation analysis and discussion.

IPO Process (VI) Pricing and Allocation

• IPO training explores the five ingredients to successful IPO pricing. Avoiding money left on the table: yet another conflict of interest for the syndicate. Fixed price vs tender price.
• What it is and how it is done. Actual syndicate mechanics. The self-fulfilling prophecy. Announcing shareholder commitments. Splitting the investor lists. Understanding and controlling the syndicate process (despite the syndicate’s momentum). How many investors should be contacted?
• Investor allocation. When and how it happens. Management savviness versus proxy advisors help. Understanding the role of each investor in the transaction. Different investor profiles. Handling the syndicate’s biggest conflict of interest (and legal right to do it). Why the company must ‘run’ the show.
• The green shoe. Definition, origin and its use. Legally bound by the UWA.
• Final steps: The go/no-go call. Significance and relevance. Who should and should not be on the call? Validating market conditions. Last-minute legal challenges. Syndicate’s safety net.
• Shares go live. Understanding the initial share performance.

The final team exercise in this IPO training course: Allocating shares in a simulated IPO based on different investor types and corporate interest.