FINANCIAL MARKETS: THE SECRET BENEFITS OF IPOs
The media often shares the names of high-net-worth individuals ("HNWIs") associated with IPOs and Listings, in many cases attaching a degree of celebrity status to them.
Last year's IPO of Bumble, the online dating application, was among the high-profile examples of that, since it turned its cofounder and CEO Whitney Wolfe Herd into the world's youngest self-made female billionaire. Typically however, little is disclosed about the actual IPO and what is involved, either actively or passively, or the rationale behind it.
Without a doubt the appetite for IPOs for those in the know has never been greater. In part that is being driven by the sheer volume of people now classified as HNWIs following the significant rise in wealth generation over the past 30 years, and in part by market forces like the global pandemic and geopolitical tensions reinforcing the need for those individuals and their families to make plans to ensure their wealth is passed safely and effectively down the line. For those in the know, the stock exchange holds the key to that success.
At Amicorp, a large number of our clients are families with generational wealth – or sometimes referred to as "old money" – which has been accumulating for generations through growth, mergers and expansion of the original family business. Many choose to look for ways to grow that wealth and/or to pass that on through large corporations and holdings in public listings. The reason for that, is that it comes with several key benefits, not least because it brings external advisors and managers into the corporate governance structure while still allowing the family to maintain successful management and control of their business empire.
ENHANCED CORPORATE GOVERNANCE & SHAREHOLDER SECURITY
Companies do face extensive screening and oversight requirements before being allowed to list and trade. It is this process however that brings greater confidence and transparency to listed entities, resulting in enhanced lending and borrowing capacity, and opening the door to the greater investor and capital inflow. Many companies, with the right team of advisors in place, have also successfully been utilizing listings for a higher valuation on their subsidiaries for later sale and spinoff. During negotiations with third parties or private equity firms, the valuation becomes an important part of the overall negotiation process. With higher valuations comes greater negotiating power.
FAMILY BUSINESSES OUTPERFORM MARKET TRENDS
Since the introduction of the first trading exchange in Amsterdam in 1611, traders and family-run businesses alike have been taking advantage of the leverage offered by listing exchanges globally. In fact, over the years family-run businesses have been more popular with retail and institutional investors alike. Major investment banks have realized this investment trend over the past 50 years, to the point where large banks like Credit Suisse publish an index of family-owned companies which have consecutively outperformed the wider market over the past few decades, regardless of the sector size or region.
Each family business is unique and deciding when, why, how and where it is right to list your business can be difficult. The processes involved as a result of public disclosure and investor relations tasks can also be complex and time-consuming. A trusted advisor like Amicorp can guide you through and manage that for you – from carrying out eligibility checks, to exploring jurisdictional and exchange options, to pre-IPO preparation and submissions, through to managing brokerage accounting requirements.