LONDON (Reuters) - Going on
the road isn't what it used to be for investment bankers
hawking shares in companies seeking a stock market
listing.
Gone are the days of the private jet and the two-week carousel of
five-star hotels in Europe and the United States. Instead, it is
more likely to be a scramble from Hong Kong to New York, often
flying on commercial airlines, to capture the ear of potential
investors.
Companies looking to woo prospective shareholders are in a rush to
get their stock listed while market sentiment is still positive,
conscious that rising tensions in Ukraine and the Middle East could
weaken investor appetite.
Anxious to reach market before their competitors, company executives
and their bankers are embarking on whistle-stop tours of financial
hubs such as London, New York, Boston and Singapore, each costing
250,000 euros ($334,000) to 350,000 euros or more.
"You're getting to the market much quicker before a window might
close," said roadshow project director Fallon Painter, citing the
example of Russian hypermarket chain Lenta <LNTAq.L>, which squeaked
through its initial public offering (IPO) the same week that Russia
entered Crimea.
Painter is the investment banking world's equivalent of a rock
band's roadie. The company for which she works, Media Tree, is hired
to organize and run the investor roadshows at which companies pitch
their stock.
Bankers are expecting a busy second half after strong equity markets
helped European IPO issuance levels to more than triple in the first
half of 2014 against the same period last year, with 130 companies
selling $41.2 billion of new shares - the highest since 2007,
Thomson Reuters data show.
The wave of issuances helped to compensate investment banks for weak
trading revenues, with Goldman Sachs <GS.N>, JP Morgan <JPM.N> and
Deutsche Bank <DBKGn.DE> taking the top three positions for European
IPOs by deal value.
RAT RACE
With such a large number of IPOs, companies are battling for
investors' time and bankers sometimes try to steal one another's
appointments. To avoid such shenanigans, which can cause problems
with rivals, companies such as Media Tree are hired to deal with
scheduling problems.
"It turns sometimes into a little bit of a rat race," Painter said.
"But it's not convenient for them (the bankers) to have a spat when
they have to see each other's faces on a new deal in a week's time."
The emergence of large institutional investors and growing pools of
private wealth in Asia and the Middle East has also expanded the
number of cities that need to be visited, meaning that management
teams sometimes split up to cover more ground.
But such a division of labor can be counter-productive, says Aquico
Wen, a former Legg Mason fund manager and founder of Asia-focused
fund firm Victoire.
"An investor gets an incomplete picture of the management team if
the chief executive heads one delegation and the chief financial
officer another," Wen said.
Businesses wishing to list also face a tougher sales pitch following
poor aftermarket performances from the likes of British retirement
group Saga and Spanish industrial testing company Applus, which have
made investors increasingly choosy about which offers they back.
While some bankers privately grumble at the monotony of seeing
the same presentation and often hearing the same questions in
multiple locations, there is general agreement that the roadshow is
a crucial part of the IPO process.
A company's management needs to be able to present well and answer
questions competently to win over investors.
"When a deal is difficult, there's nothing that sells a company
better than a good management roadshow," one former IPO banker said.
For Marcus Bray, the managing director of roadshow and creative
agency Imagination, there are parallels between his current job and
his previous life as a theater producer.
"Issuers and the banks really want to find a way of differentiating
themselves and telling their story," he said.
The tighter timeframes and pressure to see as many investors as
possible means there is little leisure time on tour for companies
and their advisers.
"They can be doing 20-hour days. The only time they're catching any
sleep is on the flight," Bray said.
A cost-conscious image has also become more important in the
post-crisis era - hence the decision by some firms to eschew the
once-ubiquitous private planes and luxury hotels.
Logistical problems are also common.
The management of stock market operator Euronext <ENX.PA> was caught
up in a recent taxi strike while in London, prompting Media Tree's
Painter to consider putting them on bicycles.
"We didn't know how well that would go down with management," she
said. "In the end we put them on the London Underground."
(story corrects name to Bray from Brown in para 18)
(Additional reporting by Nishant Kumar and Yousra Elbagir; Writing
by Carmel Crimmins; Editing by David Goodman)
