In October 2013, OzForex listed. It was the biggest IPO the Australian market had seen all year, and sparked a flurry of subsequent listings – but ‘going public’ was not the only option we considered, and until we had progressed our exit strategy to near completion, it also seemed the most unlikely.
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Initially, a trade sale to a private equity firm or a trade buyer seemed a good choice for shareholders, and the one with the least unknown factors.
Now, in hindsight, we can say the choice to list was best for the company, the shareholders and our staff.
If you’re planning to sell your business or are considering an IPO, think about running both paths to exit with what is sometimes called a ‘dual track’ process. If you’re willing to commit time and resources to it, the process will allow you to consider the advantages and consequences of both options, as well as potentially creating some price tension between the two tracks.
The following points may help you when considering your exit strategies:
If you are attracting significant interest from buyers, it makes logical sense to begin considering your exit. In our case, the inbound calls and indicative offers we began to receive from potential buyers led us to put a formal structure in place that came to be known as “the process.”
Prior to starting, do address the size of the undertaking ahead of you. For us, that meant agreeing at board level that the dual track journey would take a significant commitment of time, money and focus with no guarantee of an outcome.
However, the potential upside in terms of growth, geographic expansion and business improvement with the right buyer was a very attractive proposition, so our journey began in February 2013.
Engage a good adviser
This sounds easy, but you need to research the market and identify a shortlist of advisers with the right credentials and experience for your particular market or industry.
Do your diligence on them, talk to previous clients and ask them to present their approach before making a decision.
Empower your management team
Where you can, engage with your management team, empowering and challenging them to step up to running the business while the leadership team focuses on the sale process.
This is critical, particularly during the final weeks of the process. In general, you can expect a time commitment of at least six months for the whole process.
Pay attention to NDAs
Prospective buyers are going to want to dig deep into your business in order to understand drivers for revenue, as well as potential risks. Ensure confidentiality by having tight NDAs signed by all parties. Be especially careful of competitors, who may just be ‘tyre kicking.’
Feel comfortable saying ‘no’
During the trade sale process, management should be readily available to respond to queries from potential buyers. Even so, understand that you can still say no to some requests – particularly if commercially sensitive.
Set firm deadlines
Once you’ve built up a list of potential buyers, you’ll need to weed out the less serious parties or those who want to get there but simply can’t. Try to keep the process moving smoothly by setting firm deadlines for each phase of the process. Good advisers will manage this tightly.
Get to know your potential new owners:
You can never predict the future under your new owners, and you need to take everything they say with a grain of salt as they will be pitching themselves to you.
Nevertheless, it is still important to take the time to build a relationship with them once you get down to the final likely buyers. Even if they don’t end up being successful, you will learn something from each of them.
An IPO requires special preparation of its own, some of it complex. But, if it makes sense for your business, it is a very attractive option.
Engage good IPO advisers
As before, good advisors are key. The success of your listing will have a strong correlation with the IPO advisers you choose and the team you build around the process, which also includes lawyers and accountants.
Prepare a detailed prospectus
This will require plenty of time and resources, so be sure to prepare adequately. The prospectus will lay out the story and details of your business and help generate interest in it before listing, so it’s important that you get this right.
Engaging the right external resources to help with this is critical – you may not have the bandwidth across your existing team, so you need to judge this early.
Choose an experienced board
It is important to identify who the new Chairman of the company will be and then build a board around their skills and experience. The board should have a diversity of perspective as well as a collective set of competencies that will increase its ability to ask critical questions and assess information.
This should come in addition to its planning, stewardship and governing responsibilities, as well as personal characteristics that will stimulate healthy discussion. Start with a small board and build it over time as the business matures and grows.
Invest in your forecasts
If you go down the IPO route, you will need to provide the market with forecasts on your business. You need to invest the time in getting these right with all of your leadership team – achieving them will be critical to how the market will view your company in the future.
Taking the leap
After deciding to go for an IPO, we haven’t looked back. It was a good decision for our business, and one that was well worth the time we spent preparing for it.
Of course, the choice of which path to choose depends on what best suits your business. If you’re struggling to make the decision, it may help to ask yourself what you want from an exit. What will give you the best valuation for your business? How would you like to continue to stay involved?
These are questions only you can answer, but engaging in a dual-track process will allow you to fully explore your options. Don’t negate either until you have assessed the benefits of both – it could be that the less obvious choice turns out to be the best one.