IPOs in the UK: What’s Involved?

Obtaining a listing of your company’s shares can be a long, demanding and complicated process which will have long term implications for your company. It is therefore important that you understand what is involved as planning in advance will be crucial if the IPO is to be successful.

Preparing for an IPO

The article Getting Ready for Your UK IPO sets out a number of steps your company will need to have considered before the decision to float is taken.  Your company will be in a better position to start the process once it has in place most, if not all, of the following:

• A successful business and a well thought out, focussed strategy;
• A track record of sound financial performance showing positive trends;
• Favourable financial prospects;
• An experienced management team; and
• Strong financial, operational and compliance controls.

Type of Listing 

This will depend on certain factors such as the size of the company; the amount it and the selling shareholders wish to raise; the demand for the company’s shares and the nature of the company’s business.  You will need to consult advisors at an early stage to advise on the best market for your company’s shares; the method of issue; the type of offering and to co-ordinate the process.

The Team

In addition to the internal management team, the company will need to appoint a team of advisors including:

• Lawyers – to co-ordinate the legal work including the due diligence and verification process and to advise on the ancillary documentation.
• Reporting Accountants – to undertake financial due diligence, review working capital and the company’s financial procedures and report on the historic financial information.
• Investment Bank – to manage the IPO process. It may also take on some of the following roles or separate advisors may be appointed:
  • Sponsor – required for a premium listing on the main market;
  • Book runner and underwriter – to build an order book for the shares and underwrite any shares not taken up;
  • Broker – to act as the main interface between the company and the stock market;
  • Analysts and PR Consultants – to conduct research on the company and promote awareness of the company and the IPO on the market.
• Nomad (AIM nominated advisor) – required if the shares are to be listed on AIM.

The Timetable

An IPO on the main market will usually take at least 6 months to complete, although listings on AIM can be achieved in a shorter time-frame.  Once advisors have been appointed, the company will need to do the preparatory work required to ensure it is able to satisfy the conditions for listing.  This is likely to include (depending on the listing sought) a full due diligence exercise, the preparation and verification of a prospectus/AIM admission document and the preparation of other ancillary documentation such as underwriting documents and the accountants’ reports.

Marketing and Public Phase

The prospectus, required by the London Stock Exchange to admit securities to the official list, includes financial information on the company, reasons for the IPO and about the offer itself.  This is also presented to potential investors and is often used as the basis for the decision to invest, and so is a helpful marketing tool.  As the prospectus will need to be reviewed and approved by the UK Listing Authority before the float can take place, several drafts may be required.  When the company is ready to confirm plans of the IPO, it will normally release an announcement.  The marketing exercise, usually led by the book runner, will then take place, and investors will be contacted to raise interest in your company.  Road shows, usually held over a 2 week period, will then take place during which senior management will be expected to meet with key and potential investors in order to “sell” the company.

Where an AIM listing is sought and a prospectus is not required, the company will need to produce an AIM admission document under the AIM Rules.  The AIM admission document contains similar information to that set out in a prospectus and can therefore be used to market the company in a similar way.

Pricing Meeting and Impact Day

Once the order book for the shares closes, a board meeting will be held to approve the final price for the shares.  This will be based on the orders received.  The final form prospectus/AIM admission document will then be submitted and formal applications for listing and admission to trading will be submitted before trading commences.

Life after IPO

Once a company has listed, it will be subject to numerous continuing obligations depending on the market on which its shares are listed. These obligations, which for a premium listing on the main market include complying with the Listing Rules, Model Code and the UK Corporate Governance Code and for a listing on AIM include retaining a Nomad and broker at all times and maintaining a website on which certain information must be made available, are to ensure a fair and orderly market and to ensure investors can deal in shares with the benefit of up-to-date information. The company will need to ensure it has all the appropriate procedures in place to comply with these numerous continuing obligations.