Deals: Expert views on going public

Scotland’s initial public offering activity tends to lag behind that of the UK, but the reasons for this are more complicated than things first appear, as these five specialists explain.

Doug Crawford, Partner at Brodies LLP“While capital markets provide excellent exit and growth routes for many businesses, capital market transactions have never been hugely popular among Scottish-based corporates.

“The reasons for this are complex, involving factors such as loss of control, and increased regulation and reporting. IPOs also deny management teams the chance to buy out the underlying business.

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“That lack of history, combined with the strength of M&A-focused corporate finance advice in Scotland, dictates that M&A and private equity plays will likely remain the preferred exit and development routes.”

Image: Adobe StockImage: Adobe Stock
Image: Adobe Stock

Chris Thompson, Director of the corporate finance team at AAB

“UK IPO performance in the first half of 2022 was well below levels seen in 2021, driven by turbulent market conditions from the challenging macroeconomic landscape and the high inflationary environment.

“Scottish IPOs have historically lagged behind relative to English counterparts – but with 2021 bucking the trend with a flurry of listings – so it’s not unexpected to see low levels.

“Historically, Scottish business owners have realised value through trade acquirers, or raised capital through PE/VC funds, rather than listing.”

Douglas CrawfordDouglas Crawford
Douglas Crawford

Will McIntosh, Partner at Brodies LLP

“High-growth companies have tended to prefer the flexibility that private equity offers, as well as the relative ease of raising additional funding. Initial public offerings require an additional layer of governance and higher degrees of reporting as part of investor relations, which has been a deterrent to growth companies.

“However, there remain excellent opportunities for firms to IPO if operating in the right sectors and with profiles that will excite investors.”

Gordon Steele, Partner and head of deals in AAB’s corporate finance team

Chris ThompsonChris Thompson
Chris Thompson
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“What we have historically seen in Scotland is that –irrespective of what sector a business is in – once abusiness reaches a certain scale a trade sale or private equity-style transaction has been more attractive than a listing.

“Scotland traditionally has a large proportion of owner-managed entrepreneurial businesses, rather than ones that are ultimately planning initial public offerings.

“Due to this, the advisor community in Scotland is more set up for trade sale and private equity transactions than IPOs.”

Neil McDonald, Head of corporate finance (Scotland) at Cenkos

Will McIntoshWill McIntosh
Will McIntosh

“Historically, there hasn’t been the regular flow of Scottish initial public offerings for companies to consider this as a viable funding route.

“However, successful listings like SMS and Calnex, and increasing institutional interest in sectors where Scottish businesses have strong capabilities, demonstrate that initial public offerings can be an attractive option for ambitious management teams looking for growth capital.”

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