London has long been a leading destination for companies, particularly US growth companies, looking to go public.
Recent reforms, including changes to the listing rules, have made the London markets simpler and more flexible than ever for companies looking to raise capital, execute merger and acquisition transactions, and attract international investment.
However, wary of an unfamiliar market, investor expectations and regulatory nuances, there can be some hesitancy from companies when considering London as a listing destination.
Why not London?
Some qualms come from the perception that market sentiment may not support growth company IPOs (not helped by negative commentary on the London markets in the financial press); others from perceptions that London’s capital pools are less liquid than other global markets and fears that companies (particularly in the technology and life sciences sectors) may be undervalued as a result of less specialised analyst coverage.
More generally, companies may be wary of embarking on an IPO due to potential reputational issues if the IPO is delayed or aborted and/or if the company performs less well than expected post-admission. Some may perceive, often incorrectly, that private capital is more easily accessible, with fewer conditions or limitations attached than a public listing.
What is the reality?
Despite these concerns, in 2024, companies listed on the London Stock Exchange’s markets raised an aggregate of $32.5bn (£24.7bn) — the fourth highest amount of any market, behind only the US, India and Japan and outstripping the combined volume of Frankfurt, Paris and Amsterdam.
Currently, 67 US-incorporated or US-operated companies are listed in London, with a combined market value of $123bn.
While the figures suggest the concerns noted above should not prevent a listing, appointing a corporate finance (CF) adviser early is critical to obtaining information to inform decisions, address concerns and mitigate risks for a company considering listing on one of the LSE-operated markets.
Why appoint a CF adviser?
A CF adviser guides the company through the listing process, ensuring that the relevant rules and regulations are complied with and liaises with the relevant LSE and other regulatory teams as needed.
Companies often turn to CF advisers for their deep sector insight and real-time UK capital markets intelligence. CF advisers can provide early suitability assessments to ensure company readiness, while also assessing whether there is sufficient appetite in the market for the listing.
CF advisers understand the importance of choosing the right time to list and ensuring alignment to help achieve success and so will be prepared to have conversations on readiness and steps that need to be taken to give the company the best chance of achieving a successful listing.
Crucially, they will also provide an independent valuation view, enabling open, honest pricing discussions from the outset — fundamental to any successful transaction.
They can also:
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mitigate unrealistic expectations around valuations through ‘early look’ investor meetings and honest feedback;
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provide advice and guidance on the IPO process, including the timing of key legal and accounting workstreams; and
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make introductions to other professional advisers and potential executive and non-executive directors, where needed.
Which is the right CF adviser?
Choosing the right CF adviser for the company is itself a strategic decision. Ensuring the CF adviser has relevant sector expertise, recent deal experience in the company’s valuation bracket and investor relationships that match a company’s growth ambitions is essential.
Also, because of the ongoing nature of the CF adviser role for Aim companies and the continued interaction between them and the company for any LSE listing, effective communication and understanding between the company and the CF adviser is critical. In short, they must be the right cultural fit.
Post listing
Following the listing, the CF adviser will continue to advise the board, ensuring that they are aware of their ongoing obligations and are compliant with the relevant rules.
However, their role is much broader than just being a quasi-regulator; they act as a company’s key commercial sounding board, especially when considering funding options (and timing), possible value accretive transactions and key messaging to the market in order to ensure investors are fully appraised of new developments.
Life as a listed company will present hurdles that must be worked through. The guidance of an experienced adviser who knows the company and its board, and has an honest and open relationship with them, is invaluable to help achieve success.
Fiona McFarlane is a partner at Bird & Bird; and David Hignell is a director – corporate finance at SP Angel Corporate Finance
