UK Law and Practice Contributed by: Carly Gulliver, Giles Distin, David Anderson, James Dawson, George Danczak and Elvan Hussein, Addleshaw Goddard
3. Initial Public Offering (IPO) as a Liquidity Event 3.1 IPO v Sale Rising Popularity of Sales In terms of numbers of transactions executed for UK companies over the last few years, sale processes have clearly been far more popular than IPOs. This is due to a variety of factors, including that the UK public markets have not been readily open to a broad range of companies undertaking IPOs in recent years. Opening Up of the UK IPO Market The picture for IPOs is now starting to improve. The number of UK IPOs had reached historic lows, but there are now signs that the UK IPO market is starting to open up, alongside markets in other jurisdictions. The Beauty Tech IPO is one example of a technology company choosing a UK flotation in 2025, which signi- fies greater positivity in the UK IPO market. Advantages and Disadvantages of a Dual-Track Process The dual-track process is popular (even if not the default choice), as it offers flexibility in responding to market appetite. However, a dual-track process can be difficult for SMEs to execute effectively as it can take up the limited capacity of management teams (particularly where such teams are smaller). Running a dual-track process may also prove to be more cost- ly than choosing either an IPO or sale process route alone. 3.2 Choice of Listing Floating on a Home Exchange It is likely that a company would decide, in the first instance, to pursue a listing on its home country exchange for the initial public offering. Benefits of this include better brand recognition in the local market and easier communication lines with investors and regulators. Floating in one’s home market potentially improves the chances of local market institutional investor interest, which may be important to make an offering in connection with a listing viable. Floating on a Foreign Exchange Recent trends show that certain foreign-headquar- tered companies in certain industry sectors (eg, in
the technology space), and above a particular size or stage of development, may seek to float on the US markets, as there is a perception that these markets will have a deeper pool of capital available to certain companies, particularly in certain industry sectors. There have been some high-profile examples of such foreign IPOs, but careful assessment would need to be made, alongside a company’s broker, on a case- by-case basis, regarding whether a foreign listing is genuinely in the best interests of the company con- cerned, particularly where the business of a company has little connection with the jurisdiction in which the foreign stock market is located. Evidence suggests that listings of UK companies on foreign exchanges may often not result in more beneficial valuations compared to market peers, and there are several examples of such companies sub- sequently choosing to delist. UK companies may also find there is an additional compliance burden, and associated expense, in obtaining and maintaining a foreign listing; such companies also may not benefit from the low litigation environment experienced on the UK securities markets (eg, in respect of shareholder class action claims). Dual Listings Dual listings can be popular for certain companies, particularly following a company’s original IPO and for companies with international businesses that may be familiar to local investors on each stock exchange, and that may find relevance and liquidity on both exchanges. Such dual listings are rare at the time of a company’s IPO, due to, amongst other things, the significant resource requirements needed to comply with often complex – and not necessarily complemen- tary – listing requirements in two different jurisdictions. A recent example, however, is the simultaneous dual listing of Fermi Inc., an AI data centre developer, on both the London Stock Exchange and NASDAQ. 3.3 Impact of the Choice of Listing on Future M&A Transactions If a company is UK incorporated, listing on a foreign exchange should not affect the feasibility of a future sale of such company by reference to issues regarding minority non-assenting shareholders. Rights and obli- gations governing minority shareholder squeeze-outs
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