To IPO or not: Valuing a business

Just how do you go about establishing your wealth management business to be seen by others as a premium business in terms of value, particularly when listing on the ASX?

This was the question facing the Director of Equity Capital Markets at Bell Potter, Vaughan Webber, in his May presentation at the IMAP MDA Providers’ forum.

According to Webber, we all want our businesses to be more valuable, so when the owners finally realise the value they have created, they can receive a higher figure rather than a lower one, for the hard work done in building their business.

MDA providers, in particular, have made a choice that both they and their clients can benefit from a business that goes beyond advice into portfolio management. The multiples that wealth management businesses command demonstrate that, when properly executed, this is a sound strategy.

Webber said for any business owner considering listing on the ASX, it was important for them to note that establishing a business’ value was not simply relying upon earnings, revenue or fund multiples on a normalised basis.

Instead, he said it was equally important to consider the investable attributes of a business.

Webber identified four such investable attributes, being: the financial, business, cultural and structural characteristics of the company.

While listing on the ASX can be a viable pathway to creating value for a business, Webber added there were still a number of things that business owners needed to consider first before undertaking the IPO.

“Firstly, it’s a two-year process, then you need to consider escrow and liquidity. Then you need to consider the business’ performance post listing. Not all businesses can be listed, so there’s a lot to consider before undertaking the process,” he said.

Webber recommended that any business owner considering undertaking an IPO, which is a costly process, at least first test the market’s appetite by talking to investors and gauging their interest in the listing.

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