Companies wishing to offer their shares to the public for trading on the stock exchange need the support of an authorized intermediary institution throughout this process.
A brokerage/investment house that is authorized for initial public offer (IPO) advisory and intermediation is important for the successful completion of the IPO process. It plays an active role in developing the IPO strategy, determining the timing and story of the IPO, advancing documentation with relevant institutions, selecting and coordinating other advisors such as independent audit firm and legal counsel, conducting marketing activities for the IPO and managing the consortium stage.
A roadmap for companies wishing to go public:
The first, and probably the most difficult, step towards an IPO is the decision-making phase. Once this decision is made, the first thing to do is to determine the internal working team.
The working team should consist of mid-senior level managers, people in charge of the finance department and personnel responsible for public relations. Once the working team is established, an intermediary agreement should be signed between the company to be offered to the public and an intermediary institution authorized by the Capital Markets Board (CMB) of Turkey. The list of intermediary institutions authorized for public offerings can be found on the CMB's official website.
There are some criteria to consider when selecting an intermediary institution for an IPO:
The important stages of the IPO process are as follows:
Preparation phase: After reviewing the company structure, operations and financials with the appointed intermediary institution, the timeline is determined. Other advisors, such as legal advisor and independent audit firm, are selected. The application for the Amendment of the Articles of Association is also made at this stage. Detailed due diligence is initiated and a draft prospectus is prepared.
Valuation and marketing documents: The investment story of the company is studied and a business plan is prepared to form the basis of the valuation in line with the company's future strategies.
Applications: Following the preparation of the audited financial statements, applications are made (Prospectus and other documents) to the CMB and BIST and the approval process begins. The draft prospectus is published on company websites. The business plan is finalized. After the valuation analysis is completed, the price of the shares to be offered to the public is determined and submitted to the CMB in the draft Price Determination Report. The application process is managed under the leadership of the intermediary institution.
Approvals: After obtaining CMB and BIST approvals, the approved Prospectus and Price Determination Report are published.
Roadshow: Roadshow, i.e. marketing campaigns for investors, are initiated. Book building is initiated, which usually takes a few days to complete. The intermediary institution’s relationship with potential domestic and foreign institutional investors is the most important factor in determining the scope and duration of the roadshow.
Book building and listing: Demand from institutional and retail investors is processed in a way that best shapes the future performance of the stock. After the end of bookbuilding, shares are allocated to investors. IPO results are reported to the CMB, BIST and Central Registry Agency (CRA). Following the exchange of money and securities, the shares begin to be traded on the stock exchange.
After the initial public offering: If necessary, price stabilizing actions are taken within the specified time interval. The research department of the intermediary institution prepares periodic reports on the stock, supports investors to follow the stock and helps long-term price stability.
Thanks to the strong cooperation of the company management and the coordination skills of the intermediary institution, it is possible to finalize a standard IPO project in approximately 5 months from the point when the company is ready to go public.
The support and supervision of the intermediary institution is available at all stages of the IPO. During the IPO preparation phase, the selected intermediary institution helps to set the timeline and create the IPO story.
The intermediary institution plays an active role in selecting other advisors such as legal advisor and independent audit firm. It conducts the due diligence process and valuation study. It also prepares the Price Determination Report and deals with CMB and BIST filings as well as leads the process on structuring issues such as the size and form of the IPO, the balance of capital increase/share sale, and fund utilization areas.
The intermediary institution prepares the consortium presentation and forms the consortium during the IPO process. In the same period, the Roadshow presentation is prepared and rehearsed with the management team. Following the approval of BIST and CMB applications, Public Disclosure Platform (PDP), CRA and Takasbank applications are also completed. Shares are distributed by the intermediary institution after the end of bookbuilding.
The intermediary institution regularly publishes a research report on the IPO company after the shares start trading on the stock exchange.
You can access the list of intermediary institutions authorized for public offerings on the CMB website by clicking on the link.
Responsible for the overall management and coordination of the IPO process. The consortium leader is paid a commission fee based on the size of the IPO.
Other institutions acting as intermediaries during the book building stage. Consortium members are paid commissions fees in proportion to the demand they collect.
In order to accurately determine the price of the shares of the company to be offered to the public, the financial statements of the company in question are audited by an independent audit company authorized by the CMB in accordance with generally accepted accounting and auditing standards and an audit report is prepared afterwards.
Provides advisory on legal issues related to the IPO process such as transition to the registered capital system, adaptation of new corporate governance principles to the company, preparation of the prospectus, and intermediary agreements.
With its experienced sales team, ÜNLÜ & Co is the leader in block and private placement sales in capital markets with 34 transactions. It makes a difference by reaching and meeting with many domestic and foreign investors before the IPO announcement.
It utilizes the feedback received from the preliminary meetings with key institutional investors in the development of the investor story, resulting in high demand from institutional investors.
"Investor training" is provided to institutional investors by the Research Department and information support is also provided to the sales teams of consortium members upon request.
Important IPO projects ÜNLÜ & Co has been involved in and their results:
ÜNLÜ & Co acted as the consortium leader in the Ebebek IPO in August 2023, which attracted demand from nearly 4 million individual investors, covering approximately 64% of total individual investors.
There was 14.0 times demand from domestic institutional investors and approximately 5.0 times demand from international institutional investors consisting of 13 funds from 6 different countries. High profile funds such as Franklin Templeton and East Capital participated in the IPO.
In terms of allocation ratios, among the recent IPOs, foreign investors had the highest share of 25%, and 50% of the total sales were made to institutional investors.
ÜNLÜ & Co acted as the consortium leader in the Hitit Bilgisayar IPO in March 2022. Despite increasing geopolitical and macroeconomic risks, it is one of the IPOs with the highest foreign investor proportion in recent times.
In 2022, the company received the "Silver Award for the Most Successful IPO of the Year in Turkey" from Bonds & Loans and the "Best IPO in Central and Eastern Europe" award from EMEA Finance.
ÜNLÜ & Co acted as the joint coordinator and underwriter with Bank of America Merrill Lynch, J.P. Morgan and Credit Suisse in the USD 536 mln Şok Marketler IPO in May 2018.
ÜNLÜ & Co acted as the joint coordinator and underwriter with Bank of America Merrill Lynch in the USD 255 mln Bizim Toptan IPO in January 2011.
Challenges the institutions managing or contributing to the process may face and preventive measures and solutions for them:
The IPO process requires a timetable for each financial period, which must be completed within the deadline set for the financials for each period. Effective coordination of all stakeholders is required during this period.
The intermediary institution plays an active role in this process involving many parties such as the CMB, BIST, Takasbank, investors, company officials, legal advisors, independent auditors, and strives for the successful completion of the process.
Conclusion
Although the IPO market in Turkey, which has been very active in recent years, attracts interest, the IPO process might seem like a complex process for companies.
In addition to being a legal requirement, working with an authorized intermediary institution assists in determining the roadmap of the IPO process and ultimately allows for a successful transaction to be realized.
The popularity of initial public offerings in Turkey has been growing rapidly in recent times. Many companies are following the trend of raising capital and capitalizing on growth opportunities in this way. One of the most important factors behind the IPO boom is the high level of investor interest.
Participating in IPOs has become one of the most popular ways for investors in Turkey to protect their savings against inflation and earn attractive returns. Both the number of individual investors and the size of institutional investors' portfolios have increased significantly in recent years.
The number and size of initial public offerings in emerging markets such as Turkey are expected to grow more in the future compared to developed markets.
