case study - the experiences of businesses who have floated on the london stock exchange

Case Study: Reasons for Flotations:
Reasons for Going Public
In a recent survey undertaken by leading City lawyers Eversheds in conjunction with the London Stock Exchange, 87% of companies surveyed, having gone public on the London markets over the last two years feel that some, if not all, of their original objectives for achieving a flotation have been met. This is despite the volatility of world stock markets during this period.
Chief among these objectives has been the need to raise funds to continue growing their business, which was mentioned by two thirds of companies taking part in this survey.
This is not surprising given the number of technology companies which came to market during the period covered by the survey. However, not all companies have come to the market with the primary objective of raising money.
Around a quarter of all respondents stated that the extra credibility and profile afforded by being traded on a stock market was a major motivator in going public.
Companies are optimistic about their future prospects – and the role that being a public company will play in this – with almost half (48%) of all companies in the survey planning to undertake acquisitions in the next 12 months. Of those planning acquisitions, 57% will need to seek additional funding from the market to achieve this.
What was the main driver behind the decision to float by the companies surveyed?
When asked what the main reasons were for flotation, not surprisingly, two thirds of respondents mentioned the need to raise funds to continue growing the business.
However, not all companies in the survey had come to the market with the primary objective of raising money. Around a quarter of all respondents stated that the extra credibility and profile afforded by a stock market listing was the major motivator in coming to the market. This is reflected in the following quotes from respondents:
We wanted to raise the profile of the company with clients and potential clients. As a small private software company, we wanted to reassure clients that we would still be around in a few years time.
Finance Director, Software Company
“The object of the flotation was not to raise capital, but merely to increase the profile of the company. Our company perceives this to be of importance in marketing itself in the future. We have also run an ESOP in the past with a number of our employees already owning shares. Flotation was a way of providing increased liquidity in our stock.
Finance Director, Insurance Brokers
Figure 5: Reasons for seeking a stock market flotation
Main reasons for Proportion of seeking flotation respondents

Raise funds 64%
Increase company’s profile and credibility 23%
Use shares for future acquisitions 16%
Exit for venture capital investors 12%
Increase credibility with existing and potential customers 10%
Provide share options for directors and staff 10%
De merger from parent company 9%
Exit for company’s investors 9%
Cash shell for acquisitions 4%
Start-up business 3%
NB: Some respondents gave more than one answer.