Initial Public Offerings (IPOs)
The public markets represent an extremely valuable financing alterative, which should be explored by companies at the appropriate time. If done correctly, an IPO will generate higher Company valuations, allow for more financial flexibility due to the liquidity it provides, and can add credibility among vendors and customers. It is important that companies have a thorough understanding of the implications of being a public company and ensure they are capable of meeting the challenges.
Tunstall works closely with companies who choose to pursue an IPO. In addition to assisting in the positioning of the Company from an investment perspective, Tunstall will work with management to develop financial projections to support the Company’s valuation. Tunstall will also advise a company through every step of the IPO process, including underwriter selection, valuation analysis and marketing, and the syndication of an offering.
Case Studies
Hospice Pharmacy Services
$270 Million
The Situation:
Tunstall assisted management to buy out existing owners at a valuation of $40 million, with the new investors valuing the Company at $80 million. The result was to increase management’s ownership from 20% to 52%. The Company grew rapidly and became an ideal candidate for an IPO.
Our Solution:
Tunstall introduced the Company to 15 premier underwriters and received IPO timing and valuation estimates from each. The lowest to highest valuation estimates had a range of 216%. Based on these estimates, Tunstall assisted the Company in selecting underwriters, and initiating the IPO process. Immediately prior to filing the IPO, the Company was acquired by a strategic buyer at a price equal to the $270 million IPO valuation.
The Result:
The IPO process allowed management to maximize the Company’s valuation and ultimate exit.
Rental Car Company
$31 million
The Situation:
After successfully operating rental car franchises for several years, the owner sought to consolidate additional franchises. On a one-by-one basis, it was difficult in the private markets to finance each acquisition as the individual franchise earnings were typically small, and therefore could support very little debt.
Our Solution:
Tunstall worked with the owner to arrange an initial acquisition of franchises, and produced a “pro-forma” income statement of the combined entity, eliminating duplicative expenses and increasing net income from ($300,000) to nearly $3 million. These pro-forma earnings and the associated valuation supported an IPO with first-tier underwriters using the proceeds to 1) acquire the target franchise, 2) retire existing debt, and 3) continue to acquire franchises.
The Result:
The owner was able to execute his acquisition concurrently with the IPO, using the IPO proceeds to consummate the initial acquisition, as well as provide the capital required to expedite his growth plan. This avoided what could have been a difficult, costly, and slow growth path in the private market.