Neil Shah’s Post

Now for the big question - what do the new rules mean for UK IPO candidates? In the next in our series of blogs getting under the hood of the new UK Listing Rules, we examine what they mean for IPO candidates and how the FCA are deploying a disclosure-based approach while maintaining high standards of market integrity and consumer protection. A difficult line to tread but the new rules have already had a great reception, with a very positive impact on potential activity in UK capital markets. Let us know if you'd like to hear more. Chris Mort, Julian Makin, Richard Ho, Egor Marisin, Katie Bentel

Continuing with my summarisation and analysis of various financial articles to increase my commercial awareness, I thought I would share some recent insightful information on the buyout of Hargreaves Lansdown Article name: Hargreaves Lansdown agrees £5.4bn takeover Publisher: Financial Times A consortium of firms including CVC Capital Partners, Nordic Capital and Abu Dhabi Investment Authority have all agreed to buy Hargreaves Lansdown, taking it off public listings, for £11.40 a share and an additional 30p final dividend for the last financial year. This in total has amounted to £5.4bn for the buyout. Hargreaves Lansdown is a digital investment firm, garnering its reputation from selling investments directly to clients which are tax efficient, such as individual savings accounts and low-cost access to shares, letting it amass 1.9 million customers and overseas £155bn. However, in recent years, the company has seen financial troubles, watching its share prices decrease from £24 in 2019 down to £11 this Friday, largely cited as a result of a costly and ineffective technology overhaul from previous management. This exit allows both founding shareholders , Peter Hargreaves and Lansdown, to still see a profit. Hargreaves has agreed to sell half his 20% share for an estimated £500mm, keeping the remaining 10% under the new management. Lansdown instead sold his full 6% share.  This new deal will see the consortium take the firm off public listings, allowing it to cut more of the fees placed upon customers, along with a new technological overhaul, allowing for the further growth potential of the firm. Nordic Capital already has experience in this, taking a similar digital investment firm, NordNet, off the public listings in 2016 and exiting successfully in 2020, taking NordNet back into the public market. Previous shareholders have been offered the opportunity to roll over their stake into the unlisted company if they wish. This has however upset some of the larger shareholders, who due to regulations are barred from ownership in unlisted firms. However, the HL board believes many investors will stay, seeing the medium-term profitability. Hargreaves and Lansdown commented that the deal was bittersweet, however, viewing it as advantageous to move on to future projects.

Enhancing the IPO Allotment Tips Article Expanding on Existing Tips: * Apply for a single lot: While this often increases allotment chances, clarify that for large IPOs with high demand, applying for multiple lots might be considered, but with the understanding that it could dilute overall chances. * Utilize multiple Demat accounts: Emphasize the importance of ensuring that each account is actively used and has sufficient funds to avoid rejections. Additionally, mention that some brokers may have restrictions on multiple applications from the same PAN, so it's essential to check these beforehand. * Choose the cut-off price: Explain that selecting the cut-off price demonstrates a strong commitment to the IPO and increases the likelihood of allotment, especially in oversubscribed issues. However, also mention that for very large IPOs, a slightly lower bid might be considered as a strategy, but with the caveat of increased risk. * Avoid the last-minute rush: Detail the potential consequences of last-minute applications, such as system failures, incorrect information entry, and missed opportunities. Suggest setting reminders or using auto-fill features to streamline the application process. * Prevent technical rejections: Provide a checklist of common errors, including typos in applicant names, bank account details, and UPI IDs. Highlight the importance of double-checking all information before submission. * Consider purchasing parent company shares: Elaborate on the psychological aspect of this strategy, suggesting that it might signal strong investor interest to the issuing company. However, caution investors that this is not a guaranteed method for allotment and should be based on thorough research and analysis. Incorporating New Tips and Insights: * Understand the IPO process: Provide a brief overview of the IPO lifecycle, including stages like pre-IPO, bidding, allotment, and listing. Explain how understanding this process can help investors make informed decisions. * Leverage online resources: Recommend utilizing reliable financial websites and platforms that offer IPO analysis, expert opinions, and subscription data. * Build relationships with brokers: Discuss the potential benefits of maintaining good relationships with brokers, who might offer insights into IPO demand and allotment trends. * Consider IPO category: Explain that different IPO categories (like small-cap, mid-cap, and large-cap) have varying allotment probabilities, and investors should tailor their strategies accordingly. * Set realistic expectations: Emphasize that IPO investments involve risk, and there's no guaranteed formula for allotment. Encourage investors to adopt a long-term perspective and focus on building a diversified portfolio. By expanding on these points and incorporating additional relevant information.

Part-3 of the Hidden Insights Series: “Hidden Insights about the Book Building Process in IPOs“ 1. What is Book Building? The book-building process is a way to determine the price of shares in an IPO. Unlike fixed-price IPOs, the price in book building is not pre-decided. Instead, it’s discovered based on investor demand within a price range. Example: A company might set a price band between ₹100 and ₹120 per share. Investors then bid within this range based on how much they’re willing to pay. 2. Price Band & Bidding Process Explained - The company sets a floor price (minimum) and a cap price (maximum). Investors place bids indicating how many shares they want and at what price within this band. 💡 Fun Fact: You can bid at any price within the range or choose to bid at the “cut-off” price, which means you'll agree to pay the final price determined after all bids are collected! 3. Who Are the Bidders? The three main types of investors in the book-building process are: Qualified Institutional Buyers (QIBs): Large financial institutions like mutual funds, banks, etc. Non-Institutional Investors (NIIs): High Net-worth Individuals (HNIs) who invest large sums. Retail Investors: Individuals investing smaller amounts (up to ₹2 lakhs). 🔍 Each category has a separate quota of shares reserved, and the bidding patterns can vary across these groups. 4. How the Final Price is Determined ? Once the bidding closes, all bids are compiled to see how much demand exists at each price point. The final price, known as the Cut-off Price, is the price at which the maximum shares can be allotted without exceeding the available shares. Example: If most bids were placed around ₹110, the cut-off price might be set there, meaning everyone who bid at ₹110 or above will receive shares. 5. Why Book Building Over Fixed Price? Book building offers flexibility and transparency, allowing companies to gauge demand and investors to express their interest at different price levels. It helps ensure that shares aren’t over or underpriced, providing a fair opportunity for both the issuer and investors. 6. What Happens After the Price Is Decided? Once the cut-off price is set, shares are allocated to successful bidders based on their category and the demand. If demand is high (oversubscribed), not everyone may receive the shares they bid for, especially in the retail category. 💡 Pro Tip: As a retail investor, always bid at the cut-off price to maximize your chances of getting an allotment! #BookBuildingProcess #IPOInsights #InvestingEducation #IPOSecrets  

I enjoyed a discussion with Sam Birchall for Raconteur | B Corp™ around the Trump effect on the IPO markets going forward. Undoubtedly Trump is pro-business, but will be America first. Just a question whether the UK can hang onto the coat tails of the US, particularly with a disconnect of political ideology of the contrasting Governments today. Read more of his thoughts here: #heligangroup #corporatefinance #IPO

When the ducks are quacking, you feed them. Since the start of the year, there has been an explosion of corporate takeover activity, and now the start of IPO activity on the ASX. Like our feathered friend analogy, good corporate leaders know when to take advantage of duck feeding season, by either selling assets, or buying when targets are distressed. Poor allocators of capital on the other hand can get caught up in the frenzy, buying assets at peak cycle conditions or valuations. Increased take over activity could reflect improving confidence in the outlook, or a view that the interest rates have peaked.  Corporates with strong balance sheet positions are taking advantage of targets experiencing cyclical weakness. Adding to this is the market’s short sightedness on companies experiencing transitory issues, presenting an opportunity for patient capital to own businesses for the long term. With improving confidence, there are signs the IPO market is also thawing out. The pending success of backdoor listings/IPO of Chemist Warehouse and Guzman y Gomez Mexican Kitchen will be closely watched and could rejuvenate the IPO market which has been closed for sometime. As with any deal looking to break ground in difficult conditions, there are some clever aspects of these transactions not generally prevalent when IPO markets are quacking, such as: 📘De minimis insider selling, with most capital raised to fund growth.  📘Founder management teams with long track records in the business. 📘High growth rates as these businesses are disrupting competitors.  📘Scarcity of capital available, with existing shareholders underwriting deals. 📘Listing with a strong balance sheet providing further growth options. A healthy and functioning IPO market is beneficial to investors, as it provides access to new businesses to invest in and potential  insights into new industries. On the other side, increased corporate takeover activity also puts poorly performing management teams on notice, providing some safeguards for investors in underperforming businesses. Akin to the duck feeding frenzy, for corporates making takeovers or investors assessing new listings, the ultimate success of any transaction is determined by the return and growth of free cash flow to shareholders relative to the purchase price. This is only evident after a long period of time, which emphasizes the importance of owning companies with durable competitive advantages, management with skin in the game and a history of good capital allocation, and businesses with industry tailwinds. 📗Above everything and more importantly, it's owning these companies at the right price that matters to investment returns. 📗 For more insights, please follow us at Blackwattle Investment Partners, Joseph Koh, David Meehan Disclaimer: This is general advice only, and not a recommendation for any investment or product.

🪙💲 Exciting news in the financial world! (Texas Stock Exchange (TXSE) is on its way! @James H Lee 🤟 For decades, Texas has been the nation's leader in attracting business relocations and expansions. We are home to more Fortune 500 companies than any other state and more than 5,200 private equity-sponsored companies, many of which are preparing to access the public markets. In addition, there are more than 1,500 publicly traded companies throughout the region. With approximately $120 million of capital raised, TXSE is expected to be the most well-capitalized exchange entrant to file a registration. The liquidity providers backing TXSE Group Inc. represent a significant portion of the equity volume on U.S. lit exchanges and together comprise a majority of all U.S. listed retail volume. https://lnkd.in/grmfB_4A BlackRock Citadel Securities PwC Consulting - People & Organization #FinancialNews #TXSE #TexasStockExchange

Pre-IPO market in tizzy as SEBI flags 200-investor cap Under section 42 (2), an unlisted company cannot offer shares to more than 200 investors in the same financial year, except through a public offering. Earlier this week, Moneycontrol reported that SEBI has delayed the approval for Mobikwik and some other companies’ IPOs after finding that they had allotted shares to over 200 investors in a single year. Simply put, an unlisted company cannot privately place shares with more than 200 investors. Violation of this rule invites a penalty or having to buy the securities back from the buyers. The boom in shares of SMEs over the last couple of years has led to a scramble among HNIs to buy a piece of the company ahead of the listing. Because of the strong demand, merchant bankers have been able to find enough takers for pre-IPO rounds of funding. In some cases, the merchant banker corners a sizable chunk through fronts, knowing that the stock will sell like hot cakes upon listing. In other cases, large investors having a huge following persuade the companies to allot shares to them and their associates. Many HNIs have been borrowing funds to invest in pre-IPOs because until a couple of months ago, the approval process for SME IPOs was quite smooth. As a result, many HNIs have been able to even double their money within 6-8 months. Some merchant bankers are suggesting a workaround where the IPO-bound company allots shares to a front, which in turn sells those shares to HNIs looking to invest in pre-IPO rounds. But this solution is unlikely to work, In April, the Registrar of Companies fined crowdsourcing platform Planify and some companies for violation of Section 42 of the Companies Act. The companies had allotted shares to Planify Capital or its group company and later using the online platform, the securities were sold in the open market. There is another arrangement that merchant bankers have been suggesting to prospective investors in pre-IPO rounds. The HNIs pool the money and make a loan to the company, on the condition that the company gets an approval for the IPO within six months, Once the approval comes, the loan will be shortly converted into equity More details - https://lnkd.in/gGSMN_kb Liquidity Consultants

Our Key Takeaway from SuperReturn Despite dour comments from PE luminaries, a few firms remain optimistic, boasting robust deal flow and large target markets for acquisitions. Claims like “350,000 middle-market companies in the US” and “60,000 software companies” were made, but keep in mind that these figures likely overstate the number of companies suitable for PE and, according to the American Investment Council (AIC), 32,000 companies are already PE-owned in the US. Many of these target companies have been inundated with calls from private equity over the years in a high-valuation environment. So, how will the remaining independent companies transition to private equity ownership? 1) They will be Targeted by Increasingly Sophisticated Business Development Efforts Top firms in the middle markets aren't just waiting for auctions. They have powerful sales machines that extend far beyond emails and databases. They have "35-person teams conducting outbound campaigns and attending industry trade shows"(H.I.G. Capital). Even private credit is ramping up origination, with Centerbridge Partners, L.P. partnering with Wells Fargo and TCW with PNC. 2) Companies will Partner with PE Firms with Authentic and Differentiated Value-Added Capabilities Independent company owners will partner at a fair price with firms that can make their rollover equity worth more than if they stay independent. Claims of high rollover returns won't suffice...Independent owners have heard this countless times by PE firms. They will likely pass on those partners who simply attend board meetings and choose to partner with those who roll up their sleeves to help scale their enterprises (Vista Equity Partners). Key Takeaway The tide is going out. Only firms with deep, differentiated origination and value-creation capabilities will be able to acquire sellers at attractive prices and deliver impressive investment returns in the current environment. #PrivateEquity #Investment #DealFlow #ValueCreation #SuperReturn

The M&A environment in 2024 tested dealmakers with shifting market conditions and regulatory scrutiny. According to PitchBook, corporate buyers took the lead early in the year while private equity navigated high borrowing costs. By Q3, lower interest rates helped private equity regain ground, pushing its share of global deal value to 41.2%. Market trends will continue to shape M&A in 2025, but one factor remains constant: success depends on clear and strategic communication. Investors, employees and stakeholders need to understand the "why" behind a transaction, how it supports long-term growth and what it means for the future of the business. A well-crafted narrative strengthens confidence, aligns expectations and helps companies maximize the value of a transaction. With optimism rising, now is the time to refine your messaging and ensure you have the right partners to support your business objectives. Read more about the factors shaping M&A in this article from PitchBook: https://lnkd.in/eFbCekW4. #MergersAndAcquisitions #StrategicCommunications #InvestorRelations