Second, we calculated the exact magnitude of each issuer’s premium or discount. First, we determined whether an issuer listed at a premium or a discount valuation relative to the industry average. Uation multiple of its peers in the relevant Stoxx Europe 600 sector index. We compared each issuer’s valuation multiple, as determined by the offer price on the listing date, with the average val. We also excluded financial services firms because of the limited comparability of their revenues and margins. To control for very small IPOs (mainly technology and pharmaceutical companies tapping the market for seed money), we excluded IPOs of companies with less than €5 million in annual revenue in the year before the offering. (See Exhibit 1 and the sidebar, “Study Methodology.”)īCG’s study sampled 497 IPOs at the ten largest stock exchanges in Europe from January 2010 through June 2017. What are issuers that achieve a premium valuation doing better than their peers? To find the answer, we analyzed the influence of 24 factors in three categories: issuer characteristics, operational performance, and capital structure and financial ratios. The remaining companies-almost half-failed to reach the average multiple for their industry when they listed their shares. Among European companies that went public from 2010 through mid-2017, 56% achieved a premium valuation, although there were wide variations among industries. If the multiple exceeds the industry average at the time of listing, the issuer has listed its shares at a premium. Our research focused on the issuer’s valuation multiple as determined by the offer price on the listing date. Indeed, new research by BCG finds that some of the most important factors driving a premium IPO valuation are those for which preparation should begin well before the opening bell rings. But many others should be addressed proactively with thorough planning over an extended period. Some factors that affect success, such as investor sentiment, are beyond a company’s control, while others, such as the offer price, can only be dealt with shortly ahead of the big day. Planning for an initial public offering is a lot like planning a wedding. The previous article, “ Anatomy of an Ideal IPO Candidate,” dispelled some myths about barriers to going public. This article-the second in a series exploring the practicalities of going public-looks at what drives a premium IPO valuation. Technology, Media, and Telecommunications.
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