Minnows will precipitate an IPO domino effect, not giants argues expert

Opinion divided on the timing of ISS and OW Bunker’s decision to go public

Two of Denmark’s biggest companies, ISS and OW Bunker (see below), are set to become listed.

Outsourcing giant ISS which has over 500,000 employees worldwide, formally issued its flotation prospectus last month and was all set to go public on thursday; while marine fuel logistics specialist OW Bunker, which is Denmark’s second biggest company, formally announced its intention to launch an Initial Public Offering (IPO) last week.

Sharing the limelight

Some reports have suggested that the timing could be problematic for the two giants. However, Morten Langer, the CEO and editor-in-chief of the business newsletter Økonomisk Ugebrev, dismisses this. 

“They are very different companies and will attract different kinds of investors,” he said.

Why now?

Langer is of the opinion that economic conditions play an important role in the timing. 

“The stock market has gone up the last two or three years and valuations of companies are good,” he said. 

“Private equity firms want to monetise their investment after five to seven years and it can be difficult to find private buyers.”

He believes that, in the case of both companies, the motivation for the IPOs is to provide an investment exit for the private equity shareholders.


More in the pipeline?

There are many other companies in Denmark owned by private equity so there could be more headed towards the stock market. 

“The big question is if the companies have the right profile to be listed,” said Langer.

“It’s most likely to be the bigger companies getting listed, but I hope that small and medium-sized companies also try because they could be icebreakers for other smaller companies. You need some icebreakers in the small and medium-sized segment before you can get a lot of companies trying IPOs.”


More IPOs: more growth

There is a direct link between stock market conditions and the government’s goals for economic growth, according to an analysis carried out and soon to be published by the law firm Kromann Reumert and consultants Hill+Knowlton Strategies.

“The government doesn’t focus on the stock market as a channel for risk capital to the Danish business society, and that is a big problem,” Langer said. 

“Since the financial crisis, the banks – especially in Denmark – don’t want to lend to the small and medium-sized companies. So these companies really have a problem. And when the stock market doesn’t function, then we have a big problem for society. It could be an important step if we got more activity on the IPO market.”

The wrong focus

The Ministry of Business and Growth states on its website that the government aims to improve the effectiveness of financial markets through clearer rules for investing and trading in financial assets. The question is whether this will benefit these all-important smaller companies.

Langer thinks that this has been lacking in the past. 

“In Denmark there is a business landscape with a lot of small companies," he said. “Every time the government and the politicians make growth plans they focus on the big companies. So I think they have the wrong focus.”