Does Your IPO Need an Anchor or Cornerstone Investor?
Issuers can benefit from onboarding a respected player to support their public offering. Success requires careful planning and well-executed negotiations.
BCG works with companies throughout the IPO process to boost value and proceeds, ease complexity, and position parent and new companies for a successful path in the capital markets.
Hear the initials “IPO,” and an image springs to mind: an innovative startup offering shares to an enthusiastic public. In reality, though, IPOs frequently are conducted by mature, successful enterprises eager to create value by going public themselves or to transform a subsidiary or line of business into a standalone public company.
BCG brings a holistic, end-to-end perspective to the IPO process. BCG’s IPO consultants help optimize IPO proceeds while delving into every facet of an offering. IPOs are highly complex transactions that can involve numerous interlocking business, financial, and legal details. From initial rationale to post-separation technicalities, we work to advance each company’s prospects and market leadership.
IPOs don’t always deliver value. Our research shows that three out of ten IPOs with more than $500 million in annual revenues fail to outperform the market in the first year; this increases to about 50% for smaller IPOs. BCG’s IPO consulting services help clients navigate the demanding deal process while maximizing returns and long-term value.
Every BCG engagement begins with a deep exploration of your business. From there, we launch the IPO process by examining whether an IPO is in fact the best option. A private sale to another industry player or to a private quity firm, collectively known as a trade sale, may be preferable or equally promising.
In fact, we often recommend that clients pursue two or three paths simultaneously. Such a dual-track or triple-track strategy helps ensure that you have other viable options should an IPO suddenly become infeasible because of changing market conditions or other factors beyond your control.
IPO planning often takes place in parallel with a carve-out process, separating the target entity from its corporate parent operationally and financially. Like IPOs themselves, carve-outs typically are large-scale, high-stakes projects involving complex activities and a multitude of details. Here, too, BCG’s strategic focus and deep industry expertise help maximize the value of the newly formed asset, instead of just focusing on mechanical separation processes.
Once a company has decided to pursue an IPO, the real work begins. While IPOs can happen in as little as 6 months, 12 to 18 months is a more realistic timeline to ensure the company is well prepared for its journey as a publicly listed entity.
Our comprehensive, proven approach divides the IPO runway into three phases: conceptualize, prepare, and execute–each aiming to improve the chances of a successful IPO.
Throughout the IPO process, BCG challenges management to take the investors’ perspective and helps find solutions to the following questions:
Issuers can benefit from onboarding a respected player to support their public offering. Success requires careful planning and well-executed negotiations.
There is plenty to do before the CEO of a newly public company can ring the bell. The key to minimizing the risks of underperformance is to get the preparation right.
IPOs offering only existing shares outperform those seeking fresh capital due to the signaling effect associated with a public listing.
Companies that sell only existing shares enjoy higher total shareholder returns than those attempting to raise fresh funding—across multiple time horizons.
Some factors generally regarded as important, such as timing and the number of underwriters, appear to have little or no influence on the IPO valuation.
What accounts for performance differences in the months following an IPO? Research suggests that the reason for going public plays a large role.
