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The Silver Linings Playbook for IR Professionals with Clif Marriott

Every cloud has a silver lining. But when the IPO market gives a prolonged downturn, how do you find it? Strategic moves? Patience? Or perhaps a dash of creativity?

When the IPO market takes a nosedive, it's not a time for despair, but rather a time for strategic planning and action. As Investor Relations (IR) professionals, you're well-acquainted with the ebbs and flows of the financial markets. You've seen the highs, and now, you're witnessing a low. But remember, every downturn presents its own set of unique opportunities.

Enter Clif Marriott, co-head of the TMT group at Goldman Sachs International. With over two decades of experience in investment banking, Marriot offers a wealth of insights that can help us not just weather the storm, but also find growth opportunities amidst the challenges.

Let’s explore how we can transform this seemingly arid IPO landscape into fertile ground for strategic growth and long-term success.

The State of the IPO Market: A Reality Check

In 2021, tech companies globally raised a whopping $90 billion through IPOs. Fast forward to 2022, and that figure plummeted to less than $1 billion. Quite the shock, isn't it?

But let's not get carried away with the doom and gloom. The market is cyclical, and what goes down must come up. Or is it the other way around? Either way, the point is, markets have their ups and downs. It's all part of the game.

As Marriott puts it, "I would say Europe is going to be slower to the IPO party than the US... I think you'll see tech IPOs in the US in the second half of 2023... I would also be surprised if we don't see them in the first half of 2024 in Europe."

So, the party isn't over, it's just on a break.

The Waiting Game: While Waiting, Keep Moving

While the IPO market is taking a breather, it's not the time for you to kick back and relax. Quite the contrary. This is the perfect time to build relationships with investors.

As Marriott advises, "...use this opportunity when the deal calendar is light and other companies aren't raising capital and investors aren't looking at deals to go and build that club of investors that will make great investors at the time of the IPO."

In other words, it's time to roll up your sleeves and start networking. Start building that club of investors Marriott mentioned. Reach out to potential investors, engage with them, understand their needs and expectations. Show them why your company is a good investment.

Don't just wait for the IPO market to bounce back, use this time to your advantage. After all, when the IPO market does pick up, you'll be ready to hit the ground running. And those investors you've been networking with? They'll be right there with you, ready to invest. So, while the IPO market is on pause, your investor relations strategy shouldn't be.

That’s the thing about waiting — it’s really about preparing, strategizing, and building relationships. It's about turning this pause into a strategic move. Think chess: your move.

Running the Business: The Long Game

In the face of a challenging IPO market, it's tempting to pivot your business to make it more attractive. It's like trying to change your outfit to fit into a party you weren't initially invited to. But here's the thing, you don't need to change who you are to fit in. You need to be authentically you. And the same goes for your business.

Clif Marriott advises against this quick-change act. He suggests, "run the business in the right way, that is the right way for the business long term... resist the temptation to run the business for cash now."

So, what does this mean for you? It means sticking to your guns, staying true to your business model, and focusing on long-term success. It's about building a business that's not just ready for the IPO market, but one that's ready for the future.

After all, Rome wasn't built in a day, and neither is a successful business.

Alternatives to IPOs: The Road Less Traveled

Since we’re talking about silver linings, it's essential to remember that IPOs are not the only avenue for growth and expansion. There are other viable alternatives that can be just as effective, if not more so. Clif highlights two such alternatives: mergers and acquisitions (M&A) and private placements.

Let’s look at these options:

  • Mergers and Acquisitions (M&A): M&A involves two companies combining their resources to form a larger entity. This can be a strategic move to increase market share, diversify product offerings, or achieve greater economies of scale. As Marriott points out, the M&A markets are currently open and these transactions can result in larger, more scaled companies.

  • Private Placements: Private placements involve selling securities to a select group of investors privately, rather than on the open market. This can be a more efficient way to raise capital, especially when the IPO market is less favorable. It allows companies to bypass some of the regulatory complexities and public scrutiny associated with an IPO.

As Marriot suggests, the best companies use this time to prepare for the IPO process, run their business effectively, and build relationships with investors. Despite the challenging market conditions, there are still plenty of opportunities for growth and success.

The Future of Tech IPOs: A Glimmer of Hope

The future of tech IPOs is not as bleak as it may seem. In fact, there's a glimmer of hope on the horizon.

According to Clif Marriott, the first companies to go public post-drought will likely be those that have managed to weather the storm and come out stronger.

Here's a breakdown of the types of companies that are likely to lead the way:

  • Lower-risk companies: These are companies that have a proven track record of stability and steady growth. They're the tortoises in the race, slow and steady, but they always reach the finish line.

  • Profitable companies: Profitability is a key indicator of a company's financial health. Companies that are already profitable have a better chance of attracting investors and making a successful debut on the stock market.

  • Growing companies: Companies that are experiencing consistent growth, whether in terms of revenue, market share, or user base, are attractive to investors. Growth signals potential, and potential is what investors are betting on.

  • Household names: Companies that are well-known and have a strong brand presence are more likely to succeed in their IPO. Familiarity breeds trust, and trust is crucial in the world of investing.

Marriott also believes that certain sectors have a higher chance of breaking the IPO drought. He mentions, "AI and software companies, if profitable, could potentially access the public markets right now." This suggests that the tech sector, particularly AI and software, could be the first to bounce back.

So, there's light at the end of the tunnel. And who knows, your company might just be the one to lead the way. If you're in the AI or software space and you're profitable, you might be closer to the public markets than you think.

Conclusion: Identifying The Silver Linings (Unexpected Opportunities)

The current IPO drought might feel like a storm cloud looming over your company's growth plans. But let's take a moment to remember that every cloud has a silver lining. This drought, as arid as it may seem, is no exception. It's not just a challenge, but an opportunity in disguise.

This is a golden chance to build and nurture relationships with investors. It's a time to prepare for the future, to strategize and plan for when the market bounces back.

As Clif Marriott sagely advises, "I think the best companies use this time to prepare for the IPO process, to run the business in the right way, and to build relationships with investors."

After all, every cloud has a silver lining, and this IPO drought is no different. It's just a matter of perspective.


If you loved this value-packed session with Clif, you can access more of Sweet Tweets insightful resources on our website. Follow us on LinkedIn for the latest updates.

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