IPO will be the formation of a high-quality institutional shareholder base that will react rationally to developments in terms of their trading behaviour. An independent adviser will scrutinise the composition of the allocation proposal and analyse the profiles of the investors — requesting changes, if appropriate, and providing colour on the likely composition of the shareholder base. Secondary offerings Post IPO, there are a number of instances where a listed company will wish to continue to receive independent financial advice. Where further ‘sell downs’ of stock are envisaged, vendors/issuers will turn to independent advisers to project-manage the process, provide guidance on optimal timing and manage the syndicate, pricing and allocation. For these types of transaction, independent advisers can run confidential competitive auctions among bookrunner candidates in order to achieve firm, fixed-price underwriting at an optimal price — and eliminate the risk of leaks. Issuers wishing to raise further capital by way of a secondary equity raising will often turn to independent equity advisers to advise on the timing and pricing of a rights issue or placing. The advisers will also be consulted on the selection of underwriters, the underwriting fees and the targeting of specific investors. The level of underwriting fees for rights issues in the UK has been an area for scrutiny in the recent past from investors and for investigation by regulators. Independent advisers can play an important role in helping ensure that the fees appropriately reflect the risks that are being run by the underwriters. Rights issues require bookrunners/brokers to take firm underwriting risk for a period of at least two weeks. Usually, banks do not welcome this risk unless they are confident that the rights issue will Post-IPO considerations
Page 148 The role of the independent adviser be strongly supported by shareholders. An independent adviser will work up strategies to reduce the probability of this occurring, including techniques such as broadening the underwriting syndicate to include a more diverse range of banks and spreading the risk into smaller parcels, when conditions suggest this is the best strategy. In the last few years, approximately 50 per cent of all the larger UK rights issues, placings and open offers have utilised an independent financial adviser. Mergers and acquisitions One of the main reasons why clients hire an independent financial adviser in an M&A deal is to seek a fairness opinion. Broadly, a fairness opinion addresses, from a financial point of view, whether a transaction is in the best interests of shareholders. Independent advisers are engaged as they are not aligned to a particular interest (be that a board member, shareholder or other stakeholder) or predisposed to any particular outcome.
You've reached the end of your free preview.
Want to read all 243 pages?