US IPOs: Who's Next?
An IPO is a company’s debut into public trading. “Going public” is the pinnacle to which most entrepreneurs aspire when launching their businesses. With the summer abuzz with rumors of companies of the brink of public trading, investors are salivating to know who will be next. Business Review USA asks Kathleen Shelton Smith, Principal of Renaissance Capital and IPO expert, to project the next five companies to go public. The following are Smith’s top picks:
1. GENERAL MOTORS (GM)
In an effort to turn its business around, General Motors Vice Chairman Bob Lutz told Forbes a 2010 IPO was a possibility, but only after a laundry list of criteria were checked off, including turning a profit, generating solid cash flow and having a compelling story to tell investors.
“GM is expected to be a $20 billion IPO, which could be the largest US IPO ever,” said Smith. “The one that will file within the next month will be GM at least from what we hear.”
With November's midterm elections looming, being able to say GM was taken in and out of bankruptcy and back to the public market in just over a year would be a feather in the Obama Administration’s cap.
2. HOSPITAL CORPORATION OF AMERICA (HCA)
HCA, the largest private hospital operator in the US, filed with the SEC to raise up to $4.6 billion in an initial public offering, which has the potential to rank among the 15 largest deals ever on a US exchange. The Nashville, TN-based company booked $30.2 billion in sales over the last 12 months, and plans to use primary proceeds to pay down debt.
“There are certain companies that can raise financing through debt issuance,” said Smith, “but a lot of growth companies can’t. And so this is pretty much the avenue that they have to take.”
Toys"R"Us, the leading global retailer of toys with 1,363 stores in 34 countries, filed with the SEC to raise up to $800 million in an initial public offering. Toys"R"Us has worked to streamline its business, grow its online functionalities and integrate its Toys"R"Us and Babies"R"Us stores into a co-branded format. Investors have long anticipated the announcement by the global toy retailer, which booked net earnings of $304 million on $13.6 billion in sales for the 12 months ended January 30th, 2010. Toys"R"Us plans to list on the NYSE under the symbol TOYS.
“A lot of companies don’t have a choice, they need to come public. So there’s a lot of competition and a lot of really strong companies that are in the pipeline,” Smith said. “They need to be strong and profitable to really get out successfully in the IPO market knowing there are so many really good companies wanting to get out and offer attractive prices.”
4. SMART TECHNOLOGIES
“SMART Technologies filed recently,” Smith reported. “I would put that on my list.” SMART Technologies, which designs interactive technology products including its SMART Board for the education sector, announced terms for its IPO. The Canada-based company plans to raise $600 million by offering 35.3 million shares at a price range of $16-$18 with 26.5 million shares to be sold by insiders including private equity firm Apax Partners and Intel Corporation.
“We’re looking for [companies] that are large IPOs, that are profitable companies,” said Smith on how to determine which companies will go public. “Is it small? Is it profitable? Does it have a growth story? Then we’ll look at one we’ve been hearing a lot about.”
5. LIBERTY MUTUAL AGENCY CORPORATION
Liberty Mutual Agency Corporation, the tenth largest US writer of property and casualty insurance and a subsidiary of Liberty Mutual Group, filed with the SEC to raise up to $100 million in an initial public offering. The Boston, MA-based company, founded in 1912, booked $10.9 billion in sales last year. Liberty Mutual Agency Corporation plans to list on the NYSE under the symbol LMA.
“Companies that are going public now should go public because they need capital for growth or they really need to begin to provide liquidity for their investors, who are basically being pressured to show returns to their limited partners,” said Smith. “There’s pressure in companies to go public from their financial sponsors and also for those who are looking for growth capital.”
Six issues at the top of tax and finance leaders’ agenda
New Deloitte research reveals that tax leaders are under increasing pressure to add strategic value as companies accelerate business model transformation, from undergoing digital transformations to rethinking their supply chains or investing in green initiatives.
According to Phil Mills, Deloitte Global Tax & Legal Leader, to “truly deliver value to the business, the tax function needs to rethink its resourcing model and transform its technology infrastructure to create capacity and control costs”.
And the good news, according to Mills, is that tax and business leaders have more options at their disposal to achieve this.
Reflecting the insights of global tax and finance executives at global companies, Deloitte’s Tax Operations in Focus study reveals the six issues at the top of tax and finance leaders’ agenda.
Trend 1: Businesses seek more strategic counsel from tax
Companies are being pushed to develop new digital products and distribution channels and accelerate sustainable transformation and this is taking them into uncharted tax territory. Tax leaders say their teams must have the resources and skills to give deeper advisory support on digital business models (65%), supply chain restructuring (49%) and sustainability (48%) over the next two years. This means redrawing the boundaries of what tax professionals focus on, and accelerating adoption of advanced technologies and lower-cost resourcing models to meet compliance requirements and free up time.
According to Joanne Walker, Group Tax Director, BT Group PLC, "There’s still a heavy compliance load today, but the vision for the future would be that much of that falls away, and tax people become subject matter experts who help program the machine, ensure quality control, and redirect their time to advisory activity.”
Trend 2: Tipping point for resourcing models
Business partnering demands in the tax department are on the rise, but 93% of tax leaders say their department’s budget is remaining flat or falling. To ensure that the tax function can redefine itself as a strategic function at the pace that is required, leaders are choosing to move increasing amounts of compliance and reporting to a combination of shared service centers, finance departments, and outsourcing providers that have invested in best-in-class technology.
Trend 3: Digital tax administration is moving faster than expected
in addition to the rising focus of the corporate tax department partnering with their business counterparts, transformative changes to the way companies share tax information with revenue authorities is also creating an imperative to modernize operations at a faster pace. Nine in 10 (92%) respondents say that shifting revenue authority demands on digital tax administration will have a moderate or high impact on tax operations and resources over the next five years—and several heads of tax said the trend is moving faster than expected.
"It’s really stepped up in the last couple of years," says Anna Elphick, VP Tax, Unilever. "Tax authorities don't just want a faster turnaround for compliance but access into a company’s systems. It's not unreasonable to think that in a much shorter time than we expect, compliance will be about companies reviewing a return that's been drafted by the tax authorities."
Trend 4: Data simplification and lower-cost resourcing are top priorities
Tax leaders said that simplifying data management (53%) and moving to lower-cost resourcing models (51%) must be prioritized if tax is to become more proactive at delivering strategic insights to the business. Many tax teams are ensuring that they have a seat at the table as ERP systems are overhauled, which is paying dividends: 56% of those that have introduced NextGen ERP systems are now highly effective at supporting the business with scenario-modeling insights. Only 35% of those with moderate to low use of NextGen ERP systems said the same.
At Stryker, “we automated the source P&L process for transfer pricing which took a huge burden off of the divisions," says David Furgason, Vice President Tax. "Then we created a transfer price database to deposit and retrieve data so we have limited impact on the divisions. We are moving to a single ERP platform which will help us make take the next step with robotics.”
Trend 5: Skillsets are shifting
Embedding a new data infrastructure and redesigning processes are critical for the future tax vision. Tax leaders are aligned — data skills (45%) and technology process experience (43%) are ‘must have’ skills in a tax department of the future, but more traditional tax specialist knowledge also remains key (40%). The trick to success will be in tax leaders facilitating the way these professionals, with their different backgrounds, can work together collectively to unlock lasting value.
Take Infineon Technologies, which formed a VAT technology and governance group "that has the right knowledge about how to change the system to ensure it generates the right reports", according to Matthias Schubert, Global Head of Tax. "Involving them early was key as we took a greenfield approach, so we could think about what the optimal processes would look like and how more intelligent systems could make an impact
Trend 6: 2020 brought productivity improvements
Improved productivity (50%) and accelerating shifts to remote working (48%) were cited as the biggest operational benefits to emerge from COVID-19-driven disruption. But, as 78% of leaders now plan to embed either hybrid or fully remote models in the tax function long term, 34% say maintaining productivity benefits is a top concern. And, as leaders think about building their talent pipeline and strengthening advisory skill sets, 47% say they must prioritize new approaches to talent recognition and career development over the next two years, while 36% say new processes for involving tax in business strategy decisions must be established.