Initial public offerings – a key strategic advisory segment where Natixis leads the field

Interview with Eric Arnould, Head of Equity Capital Markets at Natixis

How did the IPO market fare in 2019 and what trends lie ahead for 2020?

The IPO market saw continued fairly low volumes in 2019 with very few offerings. However, there were some landmark deals, such as la Française des jeux (FDJ), which was the largest IPO of the decade in France with almost €1.9 bn raised, and Verallia in September, which was worth several hundred million euros.
However, we can see in talks with our clients in France that new market participants from the growth and tech sectors harbor significant potential to launch sizeable IPOs of more than €500 m with valuations of more than €1 bn: this may not happen in 2020, but rather over the years ahead. There are a great deal of these new companies in France and Europe – known as unicorns. They have considerable potential to breathe fresh life into the IPO market over the years ahead, as they are buoyed by investor and bank confidence, and also have a regulatory framework.

How are these growth companies supported?

These so-called unicorns are often supported with late-stage input from investment funds. This late fund-raising effort supports companies in their last financing round before the IPO or ahead of a strategic transaction. Foreign investors have traditionally been involved in this process, but this situation has changed and more French stakeholders are now stepping up to fund these innovative technological companies.

What successful French companies are in the Next40?

These growth companies feature strongly on the Next40, and include high-potential names such as Devialet, a start-up that specializes in acoustic engineering, and Doctolib, which raised €150 m in March last year and is revolutionizing practitioner services in several business sectors. There is also Younited Credit and Lydia in the fintech sector, as well as Ynsect and Innovafeed, which specialize in producing insect-based food ingredients in the so-called agritech and foodtech sectors. We would also mention OVH in cloud computing services. We will be welcoming several of these companies for investor meetings during the forthcoming TMT conference organized jointly by Natixis, Clipperton and ODDO BHF on March 12.

How does Natixis rank on the IPO market?

Natixis has demonstrated its ability to support these growth companies and act as global coordinator for unicorns’ IPOs. We have worked alongside Neoen, a pioneer in the renewable energy sector, and more recently FDJ. Neoen and FDJ were both very important for the French market as they were the two largest IPOs in France in 2018 and 2019 and won various awards, particularly with Euronext and Global Capital. But we also managed several other IPOs for smaller companies with strong growth potential in addition to these large transactions.

How do you explain these successes?

Our approach is based on long-term support for our clients, close cooperation as a result of the human size of our company, and our client-centric strategy, all of which promote long-lasting relationships with our clients. Extensive insight into our clients’ strategies means we play a role early on in the IPO process to offer various services, such as introducing them to investors.
We also organize regular events, such as forums and conferences, with the aim of helping our clients gain a better understanding of the markets and encouraging meetings with issuers. Last year we organized a conference along with ODDO BHF, welcoming around fifteen European companies in the renewable energy sector and executives from unlisted French, US and Middle East companies. Investors view these conferences as key events and we will be organizing another series in 2020, extending the scope to other strategic sectors such as aviation and infrastructure. We are opening these events to tech companies, with support from Clipperton, one of Natixis M&A affiliates that specializes in this segment.
An IPO is a strategic transaction for clients as it involves their capital structure and also as it is a one-off event, so it must be marketed flawlessly. The quality of our ECM teams and the ODDO BHF platform are massive advantages in effectively supporting our clients, while bankers in the Groupe BPCE retail banks can also play an important role upstream with these growth companies, as do our M&A experts, who develop close relationships with company executives.

What are the key success factors for an IPO?

I think that there are three crucial aspects:
Firstly, the quality of staff and management is a key factor in fostering trust between the company and investors who get involved in the business, which is vital.
Secondly, growth potential: if investors decide to take a stake in a young company rather than large groups such as Total or LVMH, it is because they hope the young company will offer that something extra, a share in a dream of the economy of the future and additional performance.
Lastly and more simply, sufficient fund-raising size is key in attracting a wide fund manager audience, who need sufficient free float and liquidity (trading volumes). These criteria have become more important over recent years.

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