Baker & McKenzie Study Reveals Key Factors to Consider When
Listing Securities Abroad
CHICAGO, Nov. 20, 2012 /PRNewswire/ -- Baker &
McKenzie has released a global survey report examining the key
economic, timing, and financial factors influencing cross-border
listings of securities around the world. Cross-Border
Listings 2012 shares the findings of a recently conducted
survey of corporate executives and investment bankers, along with
insight from the Firm's Securities partners and others, and
provides a roadmap for companies and financial advisors as they
consider various listing options. The report is available at
www.bakermckenzie.com/crossborderlisting/.
"As stock exchanges compete to attract more listings, our
clients have more choices than ever before when deciding where to
raise capital," said Amar Budarapu,
Chair of Baker & McKenzie's Global Securities practice.
"New York, London, and Hong
Kong continue to vie for the top spot, and each of them has
revisited or recently eased certain regulatory requirements. As a
result, companies are no longer limiting capital-raising options
solely to their home jurisdictions."
The survey, conducted by mergermarket in the second and third
quarters of 2012 on behalf of Baker & McKenzie, consisted of
interviewing 200 corporate executives and investment bankers who
have been involved in a cross-border listing within the last five
years. The resulting summary provides insight into the challenges
they faced, and the benefits they achieved in specific markets. The
report also includes eight steps to conducting a successful
cross-border listing.
Survey Highlights Changing Global Dynamics
Survey respondents predict that the New York Stock Exchange and
the Hong Kong Stock Exchange will continue to be strong performers,
especially with regard to cross-border listings. However, while
luxury goods companies continue to look to Hong Kong, mining, energy and technology
companies are exploring alternatives.
"Companies are also keeping an eye on London as the United
Kingdom is taking a cue from the
United States and considering new rules that would make the
LSE more attractive to start-ups," said Edward Bibko, Head of Capital Markets in EMEA.
"Similar to the rules recently implemented under the US JOBS Act,
regulators would reduce the number of shares a company is required
to offer when listing on the LSE. This could help keep London from losing a large chunk of technology
listings to New York."
The survey also looked at obstacles companies were facing in
deciding where to list. Among current global economic factors,
market participants saw the European sovereign debt crisis as the
biggest deterrent to conducting a cross-border listing (54%),
followed by stalled growth in emerging markets (23%), and slow
recovery in the United States
(19%). The regulatory regime within a specific market can be a
significant concern as well. Survey respondents view China's regulatory regime with the most
concern, followed by the United
States and the United
Kingdom.
In some cases, survey respondents indicated that the exchange
where they listed was not meeting their needs and they considered
delisting. Investment banking respondents, who have exposure to a
range of companies in this regard, named insufficient liquidity
(76%) as a reason for delisting, followed by high fees/costs (54%)
and strict governance and compliance requirements (52%).
"With the recent spate of Chinese companies delisting from US
exchanges, issuers should identify and avoid common pitfalls in
order to complete a listing on favorable terms," said Tom Rice, Securities Partner in New York. "It takes a significant commitment
to make a listing successful. For example, Chinese companies that
have maintained a US listing have made a commitment to the
transparency required by US regulators, and they also keep seasoned
financial professionals with public company experience in the CFO's
office."
Additional highlights from the survey include:
- Listing abroad is attractive for both emerging and
developed markets. Cross-border listings have historically
been dominated by companies from emerging markets, which look
abroad to stock exchanges with established investor bases and high
liquidity. The majority of investment banker respondents (61%)
expected this trend to continue. However, as capital markets mature
in many parts of the world, companies from developed economies are
increasingly considering raising capital abroad in order to access
a new pool of investors.
- Mid-sized companies are most likely to list on a foreign
exchange. Although there have been a number of highly
publicized cross-border listings by large multinational companies
in recent years, a majority of investment bankers (52%) believe
that mid-sized companies (market capitalization of US$250 million to US$1 billion) are most likely
to list on an exchange outside of their home jurisdiction.
- Beyond increased liquidity, other factors are influencing
cross-border listings. Corporate respondents' top three
reasons for choosing to list on a particular foreign exchange all
relate to market liquidity and the ability to realize value from
their listing through investor base (98%), favorable
price-to-earnings multiples (92%), and economic status of the
exchange's jurisdiction (83%). However, in reviewing survey
results, Baker & McKenzie found that other factors are also
encouraging companies to list abroad, such as the time required to
list, raising their profile with investors and their customer base,
and the industry focus of particular exchanges.
"Listing on a major exchange is a strong marketing tool for
companies planning to expand globally, but companies and their
advisers should carefully consider which exchange is most likely to
meet their prioritized goals," said Frank
Castiglia, Securities Partner in Sydney. "For example, we are talking to
several investment banks who were originally helping their mining
clients prepare for a listing in Hong
Kong, but are now looking at the advantages that ASX and TSX
offer, given the greater focus and track record that those
exchanges have with companies in the resources sector."
The release of Cross-Border Listings 2012 follows the Firm's
recent launch of a Cross-Border Listings App for iPad® and iPhone®,
an interactive legal tool designed to help companies and financial
institutions navigate the regulatory complexities of listing
securities abroad. The app is available on the App Store.
About Baker & McKenzie
Founded in 1949, Baker & McKenzie advises many of the world's
most dynamic and successful business organizations through more
than 4,000 locally qualified lawyers and 6,000 professional staff
in 72 offices in 45 countries. The Firm is known for its global
perspective, deep understanding of the local language and culture
of business, uncompromising commitment to excellence, and
world-class fluency in its client service. Global revenues for the
fiscal year ended June 30, 2012, were
US$2.313 billion. Eduardo Leite is Chairman of the Executive
Committee. (www.bakermckenzie.com)
Baker & McKenzie International is a Swiss Verein with member
law firms around the world. In accordance with the common
terminology used in professional service organizations, reference
to a "partner" means a person who is a partner, or equivalent, in
such a law firm. Similarly, reference to an "office" means an
office of any such law firm.
SOURCE Baker & McKenzie