Here’s the deal
An IPO can often do as much for a company’s reputation and profile as it can for raising funds. It can be the biggest communications opportunity a company has ever had.
After the enforced pause of the pandemic, 2021 saw a bumper year for IPOs as delayed listings from 2020 came to the market, economic confidence was boosted by vaccine roll-outs and financial support measures, and low rates stimulated spending. There was a new record for the highest number of listings in a single year, and the London Stock Exchange was the largest centre for IPOs outside of China and the US.
The IPO landscape has been subdued in the first half of 2022 by comparison. There was a 45 per cent dip in deal numbers in the first half compared with the same period last year, as the effects of war in Ukraine rippled through the global economy and inflationary pressures and rising interest rates affected markets. Poor post-IPO share price performance for some companies hasn’t helped with confidence. As a recession looms, the outlook for H2 looks to be equally unsettled. Investors will be shrewder with their investment strategies for the remainder of 2022.
When it comes to IPOs, EY notes that investors are “refocusing on companies with resilient business models and profitable growth, who also embed ESG in their core values.” Deliveroo’s high-profile listing and next day dramatic drop in share prices in late 2021 was an early example of why investors are shifting their focus to proven and resilient business models, rather than pandemic performers. Tech stocks are out. Clean energy companies contributing to decarbonisation targets and net zero emission targets are in.
Businesses with high growth forecasts but short histories of successful profits, the often typical darlings of the IPO market, will need to frame their narratives carefully in the current volatile environment. Owned, earned, and paid media are equally important.
Despite the caution, deals are still being done in London and around the world. Following delays in the first half of 2022, there are some big names mooted to list on the markets in the next year, including Monzo and GSK’s JV Haleon in London, and Reddit, Stripe and Discord across the Atlantic. M&A activity remains strong and latest figures show London M&A deals are up on the last cycle average. PWC predicts dealmaking “will play an important role in corporate growth strategies over the next six months”.
When it comes to making successful deals, differentiation and track record are always key. ESG embedded into a tried and tested corporate strategy that delivers revenues and results will increasingly provide a more attractive proposition for investors.
Effectively communicating solid experience and sustainable growth strategies will be the watchwords for businesses looking to list and make deals in the next few months. Slow, steady and sustainable looks like it will win the current investment race.