The four panelists in this discussion: Nadja Picard, Partner at PwC Germany; Christoph Großekämpfer, Managing Director at Mutares; Christian Kolodinski, Director at Rothschild Advisors; together with panel head Simon Weiss, Partner at McDermott Will & Emery, discussed how private equity and public markets go together.
First, the panel focused on the recent developments in the IPO market in 2019. They asserted that the number of IPOs decreased by about 40–45% compared to 2018 at the same time. The reasons for this trend can be found in relatively weak expectations for economic growth in Europe. Uncertainty of Brexit and trade wars, especially between the United States and China, generated this reserved mood. The big evidence for hesitation in European financial markets can be seen in the leaving of fund money out of Europe and toward the US market.
But the outlook for the rest of 2019 and the beginning of 2020 isn’t as pessimistic as it seems at first glance. The panelists agreed that there is still money in the market and the companies that come to the market are successful because there is a need for fresh capital. The IPO of Teamviewer is an example of this.
Then the panel turned toward the question of what “IPO Readiness” means. They concluded that first a company has to understand what its equity story could be and back that up with numbers. Besides the numbers, it is also important to focus on the HR policy and the
IT readiness. It is not to your advantage if important people are leaving the company right before the IPO. In ddition to corporate readiness, it is also of great value to not lose sight of two other aspects. One is commercial readiness, which means generating market appetite at potential investors. The other aspect—one that is often underestimated in the beginning—is the execution readiness. Hiring the right advisor is an example of this pillar. All in all, it is important to develop the right setup for your company. Normally an IPO lasts six months, but the three pillars should be built beforehand.
Lastly, the panel outlined the difference between M&A processes and IPOs. The main difference is the audience. In the M&A process, the advisor presents you a group of potential parties, you zoom in, and then at the end there are only one or two parties left that are worth digging deeper. In the IPO process, you have to hit the nail on the head because you speak to an anonymous mass. You can only tell the story once and it has to fit. For this, you need different skills and attitudes in your management for M&As. Mutares, itself a listed company, preferred an IPO to a trade sale because of the publicity and the transparency it entails.
In the end, all panelists agreed that the work in conjunction with an IPO must not be underestimated and that you shouldn’t burn your team because sometimes the IPO could delay to the next quarter.
Dr. Simon Weiß,
McDermott Will & Emery
Christoph Großekämpfer, Mutares (1/4); Christian Kolodinski, Rothschild Advisors (2/4); Nadja Picard, PwC Germany (3/4); Simon Weiss, McDermott Will & Emery (4/4)