“IPO: A Global Guide” featured in this week’s edition of EuroWeek magazine, in the “Big Picture” column written by Equity Editor Nick Jacob. The article is reproduced below.
“The big picture: IPO: A Global Guide by Philippe Espinasse”
Issue: 1202 – 28 April 2011
©2011 Euromoney Institutional Investor PLC
It has become commonplace for long-serving ECM and investment bankers to move into the independent advisory field, as former UBS, Macquarie and Nomura executive Philippe Espinasse has done. But stopping off en route to write a comprehensive account of the IPO process is not for everyone. Nick Jacob spoke to the author to find out why he felt the need to write, who the book is aimed at and what banks could do better in the IPO process.
There is no shortage of books available about IPOs, but existing guides tend to be for specific audiences and limited in scope — for company management planning on going public, academic treatises, or limited guides to listing requirements. There are few comprehensive accounts of the entire process.
Philippe Espinasse, a former UBS, Macquarie and Nomura ECM banker, has written IPO: A Global Guide to fill just that gap.
When Nomura bought the Asian operations of bankrupt Lehman Brothers in October 2008, Espinasse was co-head of ECM for Asia at the Japanese firm. With a global financial crisis and an influx of the US bank’s managers in the offing, he didn’t need much prompting to start a new project.
The idea, he says, was born of a frustration with the lack of education around the entire process, outside — and inside — the investment banks.
“Clients I think do not necessarily understand the process, but really, it’s not just the issuers,” says Espinasse. “Even people involved in IPOs in the investment banks, whether it’s research analysts or salespeople or traders, only get to see perhaps 10% or 20% of the whole process. The same thing goes for the other advisers who are involved, such as lawyers and accountants and other experts.”
“Many, for instance, do not understand at all about the investor base for these transactions — even the difference between a value investor and a growth investor, let alone a hedge fund. The idea was to pull all that together and look at the documentation, valuation and marketing aspects of IPOs and also look at how banks pitch for these transactions and at what happens after these companies go public.”
It is that end-to-end description of the IPO that makes the book useful. The level of detail is not pitched towards specialists — it is not there to tell an originator anything novel about the product — but it will provide a comprehensive overview to those unacquainted with aspects of the process far from their field of expertise.
As well as potential issuers and professional services firms, the book should be handy for PRs, trainees and students — indeed, a Chinese-language translation is due out soon and Espinasse hopes that it will be popular with mainland MBA students.
Espinasse, still based in Hong Kong, now writes occasional journalism and is parlaying his experience into IPO consultancy, providing independent guidance to issuers as they deal with investment banks.
And having worked in execution and origination, he says that the former is often given a lower priority than the latter.
“Banks are organised to reward people for bringing on board transactions,” he says. “They are very, very good at pitching and securing mandates. But what happens afterwards, the execution, is often left to more junior people and the bankers that the clients see pitching are often not those who will work for many months on the deal.”
“Some banks have dedicated teams of bankers doing the execution — I used to be one of them a long time ago — but that phase of the deal often leaves something to be desired.”
He says that with much larger numbers of sizeable deals coming to market now, each can get less attention.
“People tend to try, fail and just move on to the next deal, which I think is quite different from when I started working,” he says. “Then, you would tell things to a client that they did not necessarily want to hear — but that has changed.”
“It’s a function of the fact that it has become a more competitive business in which fees have gradually been driven down — except perhaps in the US — and there are always more deals coming up. When I started working, a billion dollar deal was a big thing. Now at times it’s almost a once or twice a week event in Hong Kong.”
Go to www.ipo-book.com for the book’s website.
Curriculum Vitae: Philippe Espinasse
- 1991: Joins S.G.Warburg in DCM after business school.
- 1994: Moves to ECM department in London.
- 1996: Moves to Madrid to run primary equity deals in Spain.
- 1999: Posted to Hong Kong to run ECM deal execution; works on deals such as privatisations of metros in Hong Kong and Singapore.
- 2002: Leaves UBS for sabbatical at French military college.
- 2004: Recruited by Macquarie to develop and run its ECM business in Asia after acquisition of Asian broking business from ING, starting from scratch.
- 2007: Co-head of ECM for Asia at Nomura in Hong Kong.
- 2008 to date: Resigns from Nomura after Lehman acquisition. Author and consultant.