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Road to IPO

Road to IPOGoing public as a start-up

As a start-up or a young growth company, an initial public offering (IPO) is a large, but reachable goal – an important component of a sustainable business strategy. What is crucial for a successful IPO is not the company’s size, but its individual growth prospects.

 
 

Raising capital through the stock exchange

The total capital raised from an IPO is significantly higher than the amount made possible through financing rounds with venture capitalists in Europe. Going public makes it possible to access capital not previously available before an IPO. This comes from several sources, such as institutional investors, equity capital from investors, family offices, asset managers and retail investors. Investors that are directly associated with Deutsche Börse represent 35% of the world’s institutional capital. For example, Delivery Hero’s IPO raised € 989 million for the company, independent of financing through banks. This expands the entrepreneurial scope for growth, internationalisation, innovation, research and development as well as acquisitions.

The raising of capital through an IPO enables a company to raise large-scale financial investments, which can then be repeated by means of capital increases – this helps raise the capital that companies need as they grow and which the dynamic markets of the digital industry require. Therefore, an IPO offers long-term access to capital, insuring competitiveness.

These companies have already gone public – a few examples:

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Long-term growth: reasons for a start-up to go public

An IPO

  • Strengthens equity base and improves credit worthiness – this in turn facilitates the procurement of debt capital.
  • Offers current investors, like business angels and VCs, an attractive exit option – they can sell their shares during the IPO.
  • Increases the awareness of a company and its products. An IPO is a high publicity event that goes hand in hand with broad media coverage, which gives a company a lot of visibility on both the German and European markets.
  • Increases trust among customers, business partners and banks. The company valuation on the capital market takes place in real time and the company will be included on leading German, European, and global benchmark indices followed by investors, such as STOXX and DAX.
  • Increases attractiveness as an employer, not only through its heightened reputation, but also because employees themselves can invest in the company.
  • Offers interesting opportunities to meet other businesses through Deutsche Börse’s network of contacts.

Reasons to go public at a glance

Financing

  • Access to capital
  • Strengthening of equity base
  • Financial independence
  • Working capital
  • Creation of an acquisition currency
  • Ensuring growth, especially in sales, human capital and innovation

Diversification

  • Ability for asset diversification and partial exit of existing shareholders
  • Participation in the future growth of a company
  • Securing business succession

Human Resources

  • Involvement of management and employees in company success
  • Help attract new talent to management positions

Strategy

  • Expansion of market positon
  • Organic and acquisition-based growth
  • Increase in brand-awareness
  • Consolidation of fragmented market (M&A)
  • Internationalisation
  • Assurance of competitiveness
 

Checklist: Is my start-up ready to go public?

An IPO can be a realistic goal for a start-up. The following checklist shows that the steps one needs to take are not too difficult.

These are the main criteria a company needs to fulfil in order to become an attractive IPO candidate:

✓ Attractive equity story
✓ Competitive products/technologies
✓ Attractive market position with a sustainable, unique selling proposition
✓ Promising future prospects
✓ Efficient accounting/controlling
✓ Experienced management team
✓ Acknowledgement that internal proceedings will be viewed and discussed by the public

Essential preparations to go public

  • Creation of a time plan
  • Fact book as a comprehensive base of information of the company
  • IPO team consisting of a bank, lawyer, auditor and investor relations manager
  • Revised company structure to include an executive board, supervisory board, financial reporting, investor relations and compliance
  • IPO concept
  • Due diligence
  • Preparation of consolidated financial statements
  • Creation of a stock prospectus
  • Presentation material for analysts, press sources and investors with a persuasive equity story

You are not left to figure this all out on your own!
Deutsche Börse, banks and other advisors are there to help you.

 

Did you know? Alternative financing via the capital market

In addition to an IPO, there are further financing options via the capital market that growth companies can benefit from. However, these are often less well known, for example direct listing, pre-IPO private placements, SPAC, (convertible) bonds, reverse IPO or carve-out/spin-off.

If you are also interested in these options, please do not hesitate to contact us!

 

Step by step to an IPO: going public within one year

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During the careful preparation for an IPO, companies will receive competent support from the Issuer Services team of Deutsche Börse as well as from banks and advisors from the Deutsche Börse Capital Market Partners network. With this support, an IPO in Frankfurt is possible in less than 12 months.

The four phases of an IPO

From the very first contact, Deutsche Börse supports companies on their way to an IPO. The most important steps are the following:

1. Planning and preparation

In an initial meeting with Deutsche Börse all questions of the future issuer will be answered. Companies learn how Deutsche Börse and its Capital Market Partners support them on their way to the stock exchange, e.g. with legal aspects, roadshows or IPO workshops. This is followed by the so-called beauty contest, which facilitates the selection of the appropriate syndicate bank(s). Depending on the desired listing segment, the company creates the necessary structures to meet the legal requirements (e.g. accounting and controlling).

Well insulated to the stock exchange – how va-Q-tec prepared their IPO:

For many issuers, the listing on the Frankfurt Stock Exchange (FWB®) is an unforgettable highlight in their company's history. It is the result of an intensive preparation. For Joachim Kuhn, CEO of va-Q-tec, going public with his company was a great milestone. What were the tasks during the first phase? How did he select partners? In the following video, he and colleagues talk about how the manufacturer of insulation panels has made itself fit for the stock exchange.

2. Structuring

A detailed project plan brings together the corporate and financing strategy, followed by the issue concept and the equity story, which summarises the success factors and other details of the company. The due diligence is important in determining the value of the company. It provides information, which is incorporated into the central offer document, the prospectus.

3. Realisation and marketing

After the prospectus has been published, the issuing company advertises its IPO at analyst meetings, roadshows and investor presentations. The price range is determined. Then the shares are placed with institutional investors and via DirectPlace. The company and the bank jointly apply for the admission of the securities to the Frankfurt Stock Exchange (FWB®). During the subscription phase, investors decide whether and at what price they would like to invest. The issuer and the bank use the offers to determine the issuing price. Now the allocation of the shares to investors takes place.

4. Pricing and secondary market

The price for the shares on the stock exchange is formed. During the IPO event on the trading floor of the FWB, the price for the first price is determined. The continuous trading on Deutsche Börse begins.

 

Are you considering an IPO?

Then get in contact with us!

Regardless of what phase your company is in, we will help guide you to your IPO.

Capital market know-how

Is an IPO a goal for your company, but don’t think you are quite ready for the stock market?

Would you like to acquire the know-how on capital markets or learn more about the topic of an IPO?

 

Schedule a first meeting

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Is an IPO a real option for your company in the next 1-3 years? Have all of your questions answered during a first consultation and learn how Deutsche Börse as well as Deutsche Börse Capital Market Partners will support you on your way to the capital market. Contact the Issuer Services Team.

 

Further information

Report: The road to IPO and beyond – Private and public growth companies in DACH
Executive Trainings for Prime Select companies
Structure of Deutsche Börse´s primary market
IPO-line Going Public: Main steps until the initial listing
IPO-Ceremony: Celebrate your IPO
IPO line Being Public: follow-up obligations after an IPO

Additional Information

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