fedcap comments

The ASX has finally re-opened - what does this mean for your business?

Until 2013 the ASX had effectively been closed for companies outside the top 200 or maybe 300 to raise capital since the GFC.   For 5 years capital had really only been available for the top 100 or so companies, there were few capital raisings outside that select group and hardly any IPOs.

However that all changed in 2013 and we expect capital will still be available for smaller companies through 2014.   Availability of capital will drive all kinds of transactional activity amongst smaller ASX listed companies (and note that in ASX terms a “small” company can have a value of $500m+!) and has implications for many private businesses also.

Initial Public Offerings (IPOs) are viable again!

This means that for some private companies an IPO is once more an available option for capital raising, growth by acquisition and ultimately exit at an attractive price. Of course only a fairly small proportion of private companies are viable for IPO (and listing has its own set of pros and cons) but many of those companies will look to bulk up by acquiring others either before or after the IPO. This should stimulate activity and prices.

ASX listed companies can access capital for growth

Since 2008 small listed companies have largely been unable to access new capital for growth and have been largely inward focussed. As confidence further improves and funding is available we expect more and more small listed companies will again look to acquisitions for growth. These companies will be more actively looking for opportunities to acquire quality private businesses and will have the capacity to fund deals.

Back door listings are available for non-resources companies.

This is an option only for companies with very particular characteristics, but for those it can be very attractive. Back door listings (or reverse takeovers) have traditionally been used mainly for mining exploration projects but currently many listed shells are seeking non-resources businesses to acquire and investor funding is available.

The daily rises and falls in the ASX indices that we hear about on the news are almost entirely driven by the share price movements of the top 100 (at most) listed companies.  There’s little correlation between those headlines and the availability of capital for companies outside that select group, so when you hear about the “market” rising or falling each day it’s pretty much irrelevant.

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