The list of upcoming initial public offerings seems to be growing by the day as an increasing number of businesses are touted as preparing to enter the market. Many of these potential listings will be coming out of the hands of private equity such as Dick Smith Electronics and Nine Entertainment, however there are also a number of government-owned public assets such as Medibank Private that could list as well.
The route to IPO is filled with fees. It requires investment bankers and corporate advisors to determine and suggest the best sales structure, procedure and process to use. Then once a prospectus is produced, it requires a team of salespeople to "sell" the offer to new investors. This involves conducting and distributing research and analysis to clients and potential shareholders. Then, last but not least, money needs to be collected in exchange for shares in the newly listed entity.
There are a select number of firms that are well placed to benefit not just from a general uptick in equity markets – which is a nice tailwind in itself – but also from an uptick in IPO activity and the lucrative fees that ensue.
1. Macquarie Group (ASX: MQG) is never far away from a corporate deal in Australia. While it of course doesn't have a mandate to work with all companies, it certainly gets selected to advise (and thus charge a fee) on a significant portion of corporate actions, including IPOs.
2. Bell Financial Group (ASX: BFG) and Wilson HTM (ASX: WIG) are mid-tier stock brokers that have both retail and institutional client bases. When it comes to "selling" an IPO, brokers are quite literally the salespeople. Bell and Wilson both have substantial networks across the country, which position them well to win business from clients undertaking IPOs.
3. Computershare (ASX: CPU) is Australia's largest provider of investor services. Amongst the services provided by Computershare is the handling of the logistics that comes with collating and keeping a record of new shareholders that enter a company's register through the IPO process.
Foolish takeaway
Sometimes people are so excited to jump aboard the next IPO that they forget to consider the intrinsic value of what they are buying. This excitement can lead to the price racing far ahead of the underlying value of the business. While Foolish investors will stay well clear of any over-hyped IPO, they can still benefit from the companies that provide the services required by a rocketing IPO market.
