Mitigate IPO execution risk with cloud collaboration

SOURCE: HighQ

One of your biggest clients, United MegaCorp, needs to raise capital. It seems they’ve got into a bit of a pickle and need to start repaying some hefty debt, not to mention getting their hands on some much needed working capital. Having looked at MegaCorp’s business, you come to the overwhelming conclusion that it’s time for the big leagues – it’s time to make an initial public offering (IPO).

Apart from tapping into a diversified equity base for some ‘cheap’ cash to pay back debt and deploy more working capital, there are other benefits. Future growth potential, public image, attracting better management (through share options), multiple financing options through equity, convertible debt, cheaper bank loans and so on.

The CFO of United MegaCorp is not only agreeable, but he’s excited at the prospect of barking with the big dogs. And lest we forget, the prestige of being the CFO of a publicly listed company (assuming he isn’t turfed out by the majority holding). In fact he’s so excited he’s decided to make your bank the lead underwriter in what’s sure to be the biggest IPO of recent times (eat your heart out Facebook, go suck on an egg GM, and ICBC – erm, you’re the best, please keep buying T-Bills).

As the bookrunner for this massive IPO you have a mammoth task in front of you. Coordinating and administering an IPO can most aptly be described as a concerted collaborative effort, with a number of difficulties thrown in for good measure. Significant time and cost, public (vis-à-vis competitor) scrutiny, tight regulation, raising inadequate funds and losing company control to name few.

These problems however are a subset of the more overriding issue and one you’ll be more than accustomed to – execution risk. Let’s break down the execution process a little bit and see what’s involved from a collaborative standpoint. Whilst we’re doing it, why not throw in some ways an enterprise collaboration platform can make life a lot bit easier.

The early stage of an IPO involves advance planning. Tasks include recruiting a killer management and professional team, re-directing the company towards the public market, obtaining IPO grade audited accounts, developing good corporate governance, establishing antitakeover defences, indentifying insider bail-out opportunities and generally cleaning up the company’s act.

Enterprise cloud collaboration streamlines such activities with tools like due diligence and contract automation for vetting and recruitment. Structured databases can model accounts and poison pills. Secure file sharing allow corporate governance to be iteratively developed, shared and updated amongst the board, managers and other stakeholders. Social tools like wikis and blogs deliver friendly messages about company philosophy in order to re-orient business toward a public marketplace.

Next on the list is retaining the underwriters. With such a large IPO, this will likely be syndicated to multiple investment banks, with you as the bookrunner. This alone is a significant collaborative feat, so a robust cloud collaboration platform will be invaluable. Offering a unified and secure space for you and your fellow bankers to cogitate, orchestrate and jubilate upon the finer aspects of selling the issuer’s shares and collecting that well earned underwriting spread. Such a collaborative platform offers a plethora of tools like data rooms, workflows and communications to expedite tasks like completing the prospectus, filing the S-1 and pricing the IPO. It also offers anytime anywhere access through all your devices, which means you can now work on holiday. Yaaay. Not.

Moving on to allocation and pricing. Using granular permissioning in the collaboration platform, you can create the separate work streams necessary to conduct the sale of shares to both institutional investors (via your road show team) and retail clients (via your broker). Additionally, this permissioning can be used to create ethical walls to prevent conflicts of interest between the front office deal team and analysis department. An important stipulation considering the introduction of the Global Settlement enforcement agreement.

If you decide to price the IPO using investor demand data, enterprise collaboration can help. Using a Q&A module in the virtual data room can help you gauge buyer interest in an organised way. Furthermore, the structured database and spreadsheet module can be populated with demand data and then organised and analysed through advanced filters and search. These same tools can be used to aid a Dutch auction or some variation of it, perhaps preparing the data for a platform like ‘OpenIPO’ or other proprietary IPO software.

Finally it’s worth mentioning the legal requirement for ‘quiet periods’ during an initial public offering. With the access control you have within an enterprise collaboration platform, you can temporarily disable access to all or specific information for all or specific people. This might reduce the chances of revealing sensitive information during the build up to going public or the 40 days following the first day of trading.

Initial public offerings are complex and often long winded affairs. Above are just a few ways cloud collaboration software could help the administration and coordination of such an undertaking go quicker and smoother. Why not contact us or request a demo to see other ways in which HighQ’s enterprise collaboration solutions could help you mitigate IPO execution risk and expedite an initial public offering.