intouch
BUSINESS FEED
AUGUST 2014
1/2
FINANCING GROWTH
Equity financing:
always a good move?
ʺIt’s true that valuations are a lot better now than they
were a few years agoʺ, says Michael Van Eenoo.
ʺThere’s a lot of activity on the equity markets, in
Belgium and in Europe, and there have been quite a
few successful IPOs in the recent past. Think about
Ontex, Euronext, Argen-X for instance. Investment
funds are back on the markets and looking for
opportunities. As far as timing goes, there’s no doubt
that it’s the right moment for unlisted companies to
consider opening up their capital. However, such a
decision must not be made lightly: there are several
questions that need to be answered to determine
whether it’s what your company needs.ʺ
A very broad use
Equity can be used by companies as an alternative
solution for financing a variety of needs: new investments, international expansion, M&A operations,
© ING
Equity markets have moved on since
the crisis and both institutional and retail
investors are on the lookout for investment
opportunities. The timing is right, but when
is an IPO a good decision? We asked
Michael Van Eenoo, Head of Corporate
Finance at ING Commercial Banking.
Michael Van Eenoo
Head of Corporate Finance
ING Commercial Banking.
strengthening the balance sheet, etc. ʺThere are some
companies that have regularly issued new shares
to finance their growthʺ, says Michael Van Eenoo.
ʺThis is typical for real estate investment funds, what
we call Sicafi in French and Bevak in Dutch. Regulations require that these funds distribute 80% of
their profits to their shareholders. This means that
new investments have to rely on external funding.
Maintaining a healthy balance sheet within the legal
boundaries therefore means that they issue new
equity on a regular basis.ʺ
•••
intouch
Time for an IPO?
BUSINESS FEED
AUGUST 2014
2/2
shares will be concentrated in one
place. This will allow the external
partner to wield a lot of power at
the General Meeting and have a lot
more influence or even control in
the boardroom. When your shares
are listed, voting power becomes
much more diluted. Take the Vandeveldes and the
Lotuses of this world: they are listed, but they are still
family businesses and the family continues to have a
firm hand on the steering wheel.ʺ
ʺThe question is not simply
what you can finance with
equity but rather whether
equity is the right solution
for youʺ
ʺThat said, the question is not
simply what you can finance with
equity but rather whether equity
is the right solution for youʺ, Van
Eenoo continues. ʺTaking the first
steps towards a listing has important consequences. One of the most important is,
without a doubt, disclosure: listed companies must
regularly publish and update financial and business
information so that their shareholders or future
shareholders have all the necessary information
available to make an investment decision on the
company. This is a step that some companies and
shareholders might be a bit reluctant to take.ʺ
There are also more stringent obligations in terms of
corporate governance. ʺMany unlisted family corporations already have external board members and
have implemented corporate governance policies,
but there’s a change in scope once your company
is listedʺ, our expert explains. ʺTypically, family
owners invite external board members to bring in
some expertise or knowledge they need, but still
call the shots when a decision has to be made.
When your company is listed, all these decisions are
submitted to external scrutiny. Even when keeping
a majority stake in the company, family owners will
always lose a bit of their control once listed.ʺ
An alternative to bringing in an
external partner
ʺThat said, sometimes this solution may be more
suitable for family businesses than bringing in an external partnerʺ, Michael Van Eenoo stresses. ʺOpening up your capital to an external partner means that
Secondary market a plus
Once your company is listed, it’s also possible to appeal to the secondary market. ʺListing renders shares
liquid, so families - or the company itself - might be
able to monetise some of their shares or increase
the capital of the companyʺ, says Van Eenoo. ʺVery
recently for instance, Euronav negotiated a private
placement for some of its shares in order to finance
the acquisition of new boats to add to their fleet. The
fact is that accessing the equity markets opens up a
lot of opportunities.ʺ
A decision to ponder
Listing your company for the first time is a double-edged sword. ʺThere are many advantages,
but they come at a price. The question is how the
private shareholders view the balanceʺ, Van Eenoo
concludes. ʺA thorough discussion with a trusted
banking partner is a much-needed first step.
We often provide that type of advice to our clients.
And, of course, if they finally decide to go public, we
have the capacity to offer guidance and steer the
whole process along.ʺ