The listing arena and the marriage pandal

Becoming a listed company is a momentous change. From being a private company, you suddenly become answerable to investors, come under the regulators’ scanner, and there is pressure to perform every quarter and keep the market interested in your story.

There are several aspects a CEO/ CFO should take into account when planning for a listing.

Some entrepreneurs don’t seem to understand that there is a big difference between planning for a listing and planning for life as a listed company. In some ways this is comparable to the decision to get married and the preparation for leading a successful married life.

In the ‘marriage lifecycle’, there are several specific decision points:

being clear about what you seek in a life partner;

explaining your side of story, and ensuring that both partners are compatible;

understanding that marriage is a process of give and take, and commitment for the long haul;

ensuring that you work towards an infrastructure that is aimed at fulfilling your mutual aspirations, yet achieving it together; and

communication that is timely and sufficient.

The actual wedding, one realises, is only an event to celebrate the momentous decision.

If one were to analyse the traits of successfully listed companies and compare with those who could not achieve the desired objectives, it becomes clear that the latter probably focused more on the wedding than the marriage. In many situations, the companies tried to ride the market; they did not necessarily invest time in clearly defining their side of the story, or finding an alignment with key stakeholders.

It is very difficult to plan right, be it for marriage or life as a listed company, but it is probably easier in the case of the latter.

First, a company should understand what investors really want — good governance, growth, profitability, a solid management team and an inspiring business plan. Then, the management could apply the following tips taken from successful listed companies:

be ready with a compelling equity story;

provide an environment of trust and purpose with strong governance;

support the execution of ideas with integrated business plans, budgets, forecasts and monitoring;

be ready with your listing compliance and ongoing reporting obligations;

define your target investor base, which would be aligned with the investor story and corporate strategy;

understand the investment horizon of your investors — give importance to the quality of cash from the investor, rather than just the quantity;

evaluate the peer group performance in the identified market before deciding on the listing venue and nature of instrument;

communication — it is important to use a language that investors understand. More importantly, talk to investors when times are good, and do it more when times are bad.

Capital is available, but it’s important to remain committed — look at the big picture, and be safe rather than sorry.

The author is Partner, Price Waterhouse & Co

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