Track 1 - Managing Transactions, Cash and Talent
Wednesday, 11/11, 11:30 a.m. - Market Outlook: IPO, M&A and Private Financings
Moderator:
- Richard Jeanneret, Americas Vice Chair - Transaction Advisory Services, Ernst & Young
Panelists:
- Amy Wendell, Senior Vice President, Strategy & Business Development, Covidien
- James Montgomery, CEO, Montgomery & Co. LLC
- Scott Cutler, Executive Vice President, Global Listings, NYSE Euronext, Inc.
- Adrian Wilson, Executive Vice President - Venture Capital Relations, Square 1 Financial, Inc.
The IPO market has started to loosen up, but that doesn't mean it's safe for all companies to go to public markets.
A panel of four experts in public markets looked at the major financing strategies of growth companies: James Montgomery of Montgomery & Co., Scott Cutler of NYSE Euronext, Adrian Wilson of Square 1 Financial, and Amy Wendell of Covidien. Each brought a unique point of view, but they agreed that an IPO should be reserved only for those companies with plenty of growth ahead of it and a strategy to use the capital raised to accelerate growth.
“There still has to be a reason to go public, and it has to be something that you can't do as a private company,” said Cutler .
“The IPO market structurally changed about 10 years ago. It'll come back, but come back to what?” said Montgomery . Most likely, IPOs in coming years will have to be high-quality to attract decent valuations. “Ninety-five percent of companies will be sold rather than go to market. Smaller deals have been supplanted by private equity and growth capital.”
Wendell, of Covidien, said within the medical technology sector, acquisitions are more likely to occur as large companies look to buy technologies and innovation that they need to sustain growth. This is possible, she said, because they have large cash positions.
Montgomery agreed, saying that large caps are aggressively looking to buy up those areas that fill in their technology gaps.
Companies choosing between making themselves available for purchase, versus going to public for capital, need to consider the possibility of private financings, said Wilson . “There's an opportunity for runway financings, and that runway is getting longer and longer.” Right now, Wilson said, investors who have raised but not deployed cash are picking through their choice of possible targets. Attractive companies will do well, though valuations may not be strong.
According to Montgomery, that's why IPOs should be viewed not as an exit but as a way to attract affordable financing. “The IPO is not an exit. It's a financing event.”
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