• Service: Enterprise, Family business
  • Type: Business and industry issue
  • Date: 9/16/2013

The IPO process – a case study 

The IPO process
Company X is a leading integrated private medical service provider in the UAE, offering primary, secondary, and tertiary care through three hospitals and seven medical centres (including ancillary support facilities and pharmacies). Their turnover for the year was in excess of USD 324 million, with a gross profit margin of 42% and highly cash generative.

As of the year end, Company X’s hospitals had 225 operational beds, 3,364 employed staff, including 436 physicians, 732 nursing staff, 86 pharmacists, 522 other medical staff, and 1,588 non-medical personnel. In the previous year, Company X had the largest market share among private healthcare service providers for both outpatients (35%) and inpatients (39%) based on the total number of private inpatient and outpatient non-ER encounters in the Emirate of Abu Dhabi.

IPO proceeds to fund growth plans

Company X is seeking to list ordinary shares on the premium segment of the London Stock Exchange. The expected IPO proceeds from the primary offer is $150m primary (with secondary proceeds to be decided). The offer will be extended also to qualified institutional buyers in the US.

Bank A and B are acting as the sponsors. The IPO proceeds will be deployed to fund Company X‘s growth plans in the UAE and the region. Also it will offer an exit to existing shareholders and enhance the capital structure of the group.

Firm Y supported Company X through a combined UAE and UK team that blends specific UK capital markets expertise and industry knowledge. Firm Y initially conducted a pre-IPO readiness assessment to identify any major gaps to avoid last minute surprises.

The IPO timetable

In addition, Firm Y’s role as reporting accountant covered three main areas:

  • To provide due diligence reports to the company and the sponsors.
  • To give an audit opinion on the client’s three year historical financial track record for inclusion in its prospectus.
  • To provide reports to the company and the banks regarding the working capital sufficiency statement made in the client’s listing prospectus and in relation to the group’s financial reporting procedures.

Firm Y worked closely with Company X and its advisers over a period of several months to help meet the planned IPO timetable. Firm Y’s work has been instrumental for Company X, specifically in relation to working capital.

A robust financial model

Firm Y guided the company X team to assist them in building a robust financial model. Firm Y also performed a highly technical model review (more than 4,500 formulae tested) to identify model errors at an early stage.

The detailed analysis conducted by Firm Y during their work on the financial due diligence helped the company and banks with drafting of the prospectus, analyst presentations, and in the future as briefing documents for the brand new board. Recommendations in relation to corporate governance and financial reporting procedures were factored into key business operations.

Strong relationships were developed with Company X across the middle and senior management teams. This was enforced by the work performed by Firm Y and resulted in significant follow-on work as well.

Christophe Bernard

Christophe Bernard
I am a KPMG partner based in the French firm’s Paris office, responsible for encouraging the growth of our firms’ middle markets practice across Europe, Middle East and Africa, a majority of that market comprises of family businesses.

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