Advisers working on a flotation

Question 1

What are the different advisors?

Answer 1

• Investment Bank – multifaceted, acting as a financial adviser, lead underwriter, broker, sponsor and analyst
• Corporate broker – evaluates market conditions, assesses demand and potential institutional investors
• Sponsor – requirement for premium listing: LR 8.2.1R, FCA approved: LR 8.6.2R. Helps co form and submit application: LR 8.3, 84
• Reporting accountants: create long form accountant’s report and determine co working capital
• Solicitor – due diligence, prospectus and underwriting agreement
  Other advisors e.g. PR

Question 2

Investment Bank’s role

Answer 2

The investment bank heads up the team of advisers. Responsibilities include
acting as financial adviser – advising the company on the timing and structure of the offer, marketing and due diligence;
- acting as lead underwriter;
- preparing research on the company;
- acting as broker (see below); and
- acting as sponsor (see below).

Question 3

Corporate broker

Answer 3

Brokers generally act as agents for clients who want to buy or sell shares. They receive a commission for doing this. However, a corporate broker’s role is also to evaluate market conditions and assess the expected level of demand for the issuer’s shares among institutional and other investors. They will also market the shares to investors, some of whom may be their own clients.

Question 4

Sponsor

Answer 4

It is a requirement of the FCA that an applicant for a premium listing appoints a sponsor to assist with its application (LR 8.2.1R). Sponsors must be approved by the FCA (LR 8.6.2R).
The sponsor is responsible for a number of matters, including:
- helping the company put its application for listing together and submitting that application to the FCA;
- satisfying itself that the company meets all the relevant requirements and conditions for listing; and
making a declaration to the FCA that it has fulfilled its responsibilities under the LRs.

Under ss.88 to 88F of FSMA, the FCA can impose a wide range of sanctions on sponsors for failure to perform their duties.

Question 5

reporting accountants

Answer 5

A company wishing to float must appoint a firm of accountants to produce financial information about it.

Question 6

Solicitors

Answer 6

will conduct legal due diligence and draft and verify the prospectus.

Question 7

Other advisors

Answer 7

e.g public relations advisers are generally appointed in connection with a flotation to give advice on the marketing and advertising of the company