Not just for the big boys

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Kevin MacAllister | Partner

Belfast-based contract research organisation Fusion Antibodies plc, has successfully floated on AIM this week with a market capitalisation of £18.1m, making it only the third company in Northern Ireland to currently have plc status.

As auditors and reporting accountants, PwC worked closely with Fusion to advise and help prepare the Queen's University spin-out for their IPO. And Fusion’s success - while a great result - means there are still only three plcs in Northern Ireland, just half the number the region had just a few years ago. Contrast that with five years of growth in other regions - where Scotland has had 10 IPOs, Wales 11 and even the Isle of Man saw its five IPOs raise close to half a billion pounds in new capital.

Fusion offered a great IPO profile. Founded in 2001, the revenue generating and profitable company provides services to biopharmaceutical and diagnostics companies involved in the development of antibodies for both therapeutic drug and diagnostic applications. Since 2012, Fusion has successfully sequenced over 250 antibodies and successfully completed over 100 humanisation projects for its international, blue-chip client base, which includes eight of the top 10 global pharmaceutical companies by revenue.

That mix of pharma, life science and blue-chip customers was a textbook blend of technology and scalability that offered a compelling investor opportunity. And with proceeds from the float earmarked to expand the existing lab space, boost manufacturing, stimulate sales and marketing activities and provide additional working capital, the flotation has promised investors more of the same.

So it proved, having raised £5.5m and with the subscription oversubscribed, Fusion’s shares climbed 35% on its first day of trading (18 December 2017) before closing at 123.5 pence.

The default listing venue for high growth technology companies has typically been the US. London, however, has begun to challenge the US exchanges, starting with the IPOs of Worldpay, AutoTrader and Sophos in 2015, Blue Prism and LoopUp in 2016 and more recently in 2017, the IPOs of Alfa Financial Software and Ethernity Networks. In addition, and unlike other exchanges, London has a choice of markets for companies at different stages of growth - AIM and the Main Market, which includes its High Growth Segment. AIM in particular offers a regulatory environment more suited for small and mid-sized growing companies. And it was the latter route that Fusion pursued for its IPO and to continue its growth.

Our PwC team ranged across Assurance and Deals and between Belfast and the capital markets in Scotland. What was particularly interesting was the scale of the transaction and our ability to remain highly competitive across the regions, while delivering a real a full client service. What now remains to be seen is how the Fusion IPO has the capacity to influence and scale similar private business transactions.

Fusion’s success has reinforced two key messages. First that smaller companies can go to the City and play with the big boys and second that businesses in Northern Ireland should not be afraid of going for an IPO. Just a year ago, when PwC invited a number of Northern Ireland companies to a seminar to explore the IPO market, we identified three reasons why Northern Ireland had – at that time – only two plcs. First, was a fear that going public could dilute family control and encourage ‘new’ shareholders towards day-to-day management. Second, was the perception that listing and running a public company was cumbersome and expensive and finally, there was the ‘Facebook syndrome’ - the perception that only the biggest, mega-growth businesses should even consider an IPO. Fusion has served to challenge all three.

Finally, this is a great time to look to the market. In the current climate, with an abundance of institutional equity, sparse returns on investment and virtually zero interest rates, steadily yielding companies are increasingly attractive. The European IPO market will end 2017 on a high, with annual proceeds up around 50% year on year to well in excess of €40bn and volumes increasing approximately 13%, according to latest analysis by PwC. And with confidence and investment returning to pre-EU referendum levels, the pipeline for UK IPOs in the year ahead looks healthy and that offers more opportunities for other small regional companies like Fusion to look to the public markets for their next stage of growth.

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Kevin MacAllister
Partner
Tel: +44 (0)28 9041 5560
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