The HRD's pocket guide to IPOs
Katie Jacobs, June 10, 2016
Our new series explains areas outside day-to-day HR that business-savvy HRDs need to have a handle on
Why do I need to know about it?
According to Danny Harmer, chief people officer at recently publicly listed Metro Bank, the reason the HRD needs to take a keen interest in any potential listing is pretty simple: “As an HRD you are part of the leadership team and this is a massive step [for the business].”
Tom Attenborough, head of UK large caps, primary markets at the London Stock Exchange Group, believes there are a “number of interesting angles for HRDs” when it comes to listing.
“You need to understand it because it will fundamentally change the way the business is run,” he explains. “You will have more responsibility to the market and employees will feel differently about the organisation.”
Then there’s the “huge amount” of due diligence HR will need to be involved in, says Nicola Pattimore, HR director at outsourcer Equiniti, which floated at the end of last year. “The amount HR needs to do is second only to finance,” she adds.
What do I need to know?
Attenborough explains there are three stages to an IPO.
Stage one, a year before floatation, is your “pre-IPO readiness check”. “You need to be serious about getting your house in order,” he says.
Initial Public Offering (IPO) Process
“Can you deal with that amount of rigour in your reporting? Start talking to investors and refine your equity story.”
Stage two (six months out) involves working with banks, auditors and lawyers to complete due diligence, creating your prospectus, and briefing research analysts.
The New Nonprofit IPO
With a month to go you enter stage three: putting out your intention to float and visiting investor roadshows.
“The Corporate Governance Code is hugely interested in remuneration.
There’s a lot of reporting stuff that will catch you out if you don’t start early,” warns Harmer. “Plus you need to think about things like separating the remuneration and nomination committees.”
If you offered share options before going public “this is where it gets real”, Harmer adds.
“We had to design a simple way for everyone to understand what they could do with them [their shares].” And be wary of employees cashing out and leaving to start their own businesses, as happened when Facebook floated.
Where can HR add value?
Communication is critical, but when preparing for an IPO you may be constrained in how much you can say; this is a fine line HR will need to walk.
At Equiniti senior leaders were briefed regularly so they could cascade information down, and the executive team “were very clear on what they could and couldn’t say,” says Pattimore.
“There’s a huge role for the HRD in the preparation work,” says Attenborough.
“How will you resource it? You’ll be bringing in quite a few heads.”
If culture is a differentiator for your company you might want to consider getting involved in analyst presentations, as Harmer did: “That was terrifying.
I was presenting on our culture thinking: ‘This will affect our share price’.”
Attenborough adds that people “underestimate the pressure preparing for an IPO puts on managers”, and that the HRD should be on hand to support the IPO team and play a confidant and coaching role.
Don’t take your eye off the ball. “You’re going to be busy but you still have to do your day job,” says Harmer.
And be aware that the day you ring the bell is only the beginning. “Becoming a Plc is the start not the end,” says Pattimore. “There’s a lot of other things you need to do once you are a Plc.
You need to be mentally prepared for that.”
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A guide to listing on the London Stock Exchange: www.londonstockexchange.com/home/guide-to-listing.pdf
The UK Corporate Governance Code: www.frc.org.uk/Our-Work/Publications/Corporate-Gov...