IPOready Module 3 Recap
IPOready Module 3 Recap
Last month, we hosted another intense two-day session for Module 3 of our IPOready programme.
The theme of this module was Understanding Sources of Finance and Investors.
Day 1:
We partnered with Investec for the first day of this session, with Shane Lawlor and Paul McNally getting the discussion off to a great start with a thorough overview of financial criteria to consider when looking for finance sources, the theme of this first session. With a walk-through of their growth stories, the speakers reminded the participants of an essential lesson: to finance your growth efficiently, you need to be clear on three matters (i) how much do you need?; (ii) what do you need it for and (iii) will it drive growth?
Shane and Paul raised some essential topics to keep in mind while securing the ideal finance source, including looking at diverse and secure sources, micro-managing the selection process with your team (as you should be aware and clear about what you want and what you are asking for in your source) and looking for your ‘perfect match’ finance partner. There are definitely enough choices available nowadays to be selective in your decision-making process. After these initial steps, the next part is to determine whether your funds should be raised externally or internally; if external, should it be debt or equity, raised from whom and in what form? This segued nicely into the next part of the module: ‘Debt vs. Equity Financing and the Funding Escalator’. Companies need to understand the appropriate capital structure for their business, reflecting their stage in their growth cycle; the markets they operate in and of course their ownership preferences.
It was said that ‘risk capital seeking happens when you are at a point in life where you have been in the business for a long time and don’t feel like putting everything at risk again, so you bring in a financing partner, not because it’s the cheapest but because it’s the best option for you.’
David Mountjoy (Bank of Ireland), Michael Finucane (EIB), Clive Lennox (Silicon Valley Bank) and Conor Curley (AMCS) led the first panel discussion, moderated by David Gilligan from Investec, on debt funding from banks. They presented the key trends to expect and to be aware of as well as what to prepare in order to get the most out of your finance source. The main topics of their debate regarded the various levels and leverages of financing through banks, both for high and low range debt.
Henrik Bjerklin (Proventus) and Ross Morrow (DunPort) led the second panel in a fitting follow-up discussion on debt funding, from non-bank sources.
Henrik and Ross compared their European perspectives on the misconceptions of the debt market and enlightened the module participants on what the ideal non-bank debt financing should look like and how you should achieve it, especially pointing out the importance of finding the right legal team to assist in the process. They warned the audience not to expect to be left alone after you are lent the money! The debt team will be there in the good and the bad times, they are not going to ‘give you the money and never call back again’ as Ross explained, they are entering a partnership with you, taking a risk on your behalf. Expect them to ‘stick around’ and ask for updates and figures throughout your growth.
Ken Bowles, the CFO of Smurfit Kappa, in a fireside chat with Lewis Burnett of BNP Paribas, gave an inspiring insight into their growth story and financing of same. He spoke of the importance of re-engineering relationships and creating new ones on your funding journey, as he explained, ‘people work with people, you are not an entity or a company only, take depth from your being a person to deal with your advisors’. Given his lengthy experience in helping drive a successful company on its financial journey, he was justified and wise in advising patience and consistent attention to detail. He noted that ‘IPO is not about making money in year 1; it is about building that path to making money and delivering value over the long term.’
The audience responded well to his advice and revisited this advice when Bobby Hassett (Brewin Dolphin), Tomas Jones (Elkstone Partners), and Jim Joyce (HealthBeacon) one of this year’s IPOready participants, led a debate on family offices and science-oriented investments in private equity. The message was clear — it is your company, you built it, so make sure you tell your story clearly and with conviction! Get good advice, put the right structures in place and build a strong team.
Shane Lawlor took the moderator mantel once more and led the next group’s PE discussion. David Menton (Synova Capital), Tom Wrenn (ECI), Shane Cooke (MML), Daragh Lane (Cardinal Capital) and Niall Lund (Suretank) composed the largest panel of this module and the most diverse in terms of backgrounds and knowledge base. They gave the IPOready class a checklist to keep in mind when pitching to Private Equity investors, the specialists in growth and development capital. The expert panel answered the wave of questions from the audience on how to negotiate with your future investors before signing up with them. They concluded with that in order for a transaction to be successful it should feel fair from the outset. They were also at pains to point out that PE investors want to drive growth and not fund losses!
Building on the day’s momentum, we moved on to public markets and Eimear Moloney (Hostelworld) and Lesley Williams, in a panel moderated by Tommy Conway from Investec, challenged the audience with a set of questions to consider in terms of expected diligence from potential investors.
Can you answer the following?
· What is your the business model? Is it sustainable? What is your background story?
· Where are you in terms of governance and policy regulation? What about diversity and culture?
· Is your capital sustainable? Are you capital intensive, capital hungry?
· What is your long-term landscape? What is your competition? Where do they stand in these criteria?
To sum up these pointed questions, Eimear and Lesley reminded the attendees that what truly matters is doing your due diligence and being prepared for your first meeting as it will be the only first impression you will be able to make, and you want it to be a great one.
They echoed previous presentations in bringing attention to the fact that you must be able to share details and references on all aspects of your business with intelligence provided from your sales team. Simply said, you cannot present yourself in a financing pitch and not be able to answer your prospective investors’ questions thoroughly and accurately. This will allow you to ask the right questions yourself, but also, and perhaps most importantly, to ask for the right amount for your investment.
IPOready mentor, John Tracey followed with his experiences as a VC investor and his involvement the IPO journeys of Norkom plc, TVC Holdings plc and Dalata Hotel Group plc. His presentation found resonance in the audience when he explained that due process cannot take over daily business and that nothing ever happens in a straight line. While you should be prepared and aware of what is happening during your growth process, time can effectively become your enemy, so make sure you are very clear and to the point in what your plans entail, and how you achieve them to always stay on track.
Before the IPOready audience could close their notebooks for the day, Joe Barrett, the COO of Applegreen took the stage and entertained the IPOready pupils with his rye humour and anecdotes, in what could be a stand-up show called ‘The good, the bad and the ugly of going public by Joe!’
He spoke of the Applegreen journey recounting his best and worst experiences, explaining that the toughest director/partner/advisor might very well be your best director/partner/advisor as they’ll prepare you for the worst and everything will seem much simpler and easier after that challenge. He said that being a listed company was like playing in the 1st division.
At the end the day, to take a moment to reflect on all that was discussed this first session, the IPOready participants were invited back to the Euronext HQ to partake in a dinner with programme alumni from previous years. Everyone took this chance to network and compare notes before hearing the wise words from two previous IPOready participants. Peter Cosgrove, CEO ATA Group spoke of the importance of scaling Irish enterprise and his recent acquisition and fund raising from ISIF. Richard Kennedy, CEO Devenish and the winner of the 2019 EY 2019 Entrepreneur of the Year spoke of winning the award and recounted some of the benefits and fun moments he had during IPOready — definitely not for sharing on this blog!
If this first day could be summarised in only a few words, they would be: preparedness, intelligence and careful selection.
Alumni Dinner at the Exchange Buildings
Day 2:
The second day of this module focused on the equity markets landscape and the legal aspects of financing and started off with the CEOs and CFOs following different modules, each tailored to their role with specially chosen speakers.
Ian Duncan, of FTI Consulting, spent the first part of the morning with the CEOs, discussing business transformation while Irene Sorohan and Aileen O’Malley, of Sorohan O’Malley, spoke with the CFO contingent about the dilemmas CFOs encounter and must contend within their role. Both sides came out more knowledgeable having traded secrets and advice with their fellow participants on their respective roles and challenges.
All the participants then reconvened for a Davy double-header. Kieran Canny, Head of Equity Sales at Davy opened with a walk-through of the equity market landscape and the investor universe in all of its complexity. He spoke about the institutional investor audience for an IPO and the importance of targeting the right subset of investors, especially for smaller capitalisation companies. He said the lack of equity research coverage for some smaller companies can be an opportunity as well as a challenge. Certain investors will target those companies with less research coverage which might be the next big thing. He spoke of the typical funnel a European small cap fund manager will use to construct his portfolio, based on liquidity screening, idea generation and their own fundamental research. He spoke of the ownership structure of new IPO’s being that much more concentrated than established issuers, which means that it is all the more important to stick close to your investors but easier to co-ordinate in follow-on fundraisings!
Ronan Veale, Head of Corporate Broking at Davy gave a really succinct overview of the IPO offer process from an institutional marketing perspective. He spoke through the various stages of the marketing process but emphasised the importance of starting with a thorough assessment on your own readiness for the project. His checklist involved 1) developing an appropriate equity story; 2) consider your listing venue; 3) the type and size of any fundraise including whether it is primary or secondary proceeds; 4) have you the right governance and Board structures in place for a plc; 5) what lock-up terms are you proposing for management / existing shareholders; 6) are market conditions appropriate for listing currently and 7) are you compliant for being a listed entity. Apart for the marketing stages of ‘early-look’, ‘pilot fishing’ and the ‘’IPO roadshow’ proper, Ronan discussed the specifics around the bookbuilding process and the use of cornerstones and anchors in any process and the positive momentum they can build early on for a successful IPO.
Padraic Dempsey (Uniphar) and Martin Fahey, (Mackenzie Investments Europe) joined Kieran and Ronan in the first panel of the day, for an intensely insightful overview of the IPO process from an investor and company perspective. Paul Burke, one of our IPOready mentors handled the moderation of this interactive session,. Padraic said that he would summarise the Uniphar IPO in two words “intensity and discipline” and that being a listed company has enabled them to complete acquisitions that may not have been possible as a private company. Martin Fahey concluded the panel with some encouragement for the participants “there is always a market for a good company, with the right strategy and management track record”.
Patrick Quinlan and Alma O’Sullivan (Maples) gave the last Module 3 lesson in a closing discussion on the legal aspects of both debt and equity financing. Despite the after-lunch lull, these two representatives managed to keep the attendees’ attention until the end and answered all their questions with honesty and advice, reminding the audience that your company is only as strong as its core team and can only grow well if you support this core, both internally, and externally.
The IPOready participants came out of Module 3 with a solid understanding of the various sources of financing available; how to evaluate which one is most appropriate to them and their stage of growth; what they should be able to provide to their potential equity partners; and the resounding message to surround themselves with the right team, the one that will drive them upwards, toward success.
While you might not have been in the room to follow the ins and outs of this module, we hope that these few distilled insights from our knowledgeable speakers will whet your appetite to follow up on the next module and who knows, perhaps to apply yourself and be ready to eventually join the IPOready programme yourself!
