How Many Lead Banks?

The number of lead banks to be appointed will essentially depend on the expected size of the IPO and, therefore, on the fee pool available to the selected firms. Investment banks — other than small brokers or in the case of small cap deals — will generally anticipate earning an absolute minimum of US$2 million equivalent each for working on an international IPO. This effectively reflects the large number of resources to be made available for transactions of this nature, including a corporate finance execution team that will comprise of equity product, industry sector and country specialists, legal, compliance and corporate communication executives; equity capital markets and syndication staff; as well as equity research, sales and trading teams, usually spread out across several jurisdictions. In addition, IPOs are conducted over a much longer period of time than simple placements or block trades — although fees are generally lower for these transactions — and typically over several months. However, the execution timetable can reach a year or even more in some complex cases, for example where a group restructuring needs to be conducted before the company can actually be listed on a stock exchange. This amount can obviously increase considerably in the case of multi-billion dollar transactions, where US$4 million or US$5 million are probably more the required minimum, or for IPOs in the US, where gross fees payable by issuers and selling shareholders tend, for historic reasons, to be much higher in percentage terms than those in other markets.