Achieving a successful equity offering hinges upon the fragile interdependence of a whole host of factors - the market appetite, the company structure, historical financial reporting formats, the clarity of strategy, the ability of the chief executive to tell the investment story, and having the right transaction team.
This high degree of complexity requires a highly choreographed approach. Preparation begins months or even years in advance, and involves a co-ordinated approach between investment bankers, lawyers and communications consultants.
There is a lot being written about the situation facing the three telecommunications carriers in Iraq. They are facing growing pressure from the government to list 25 per cent of their shares next month, as part of the licence agreements awarded in 2007. The carriers are expressing concern that the climate and timing are not right.
The environment for companies looking to list remains bleak. In the first quarter of this year, the amount raised in the Middle East through initial public offerings (IPOs) was down almost 95 per cent compared with the same period last year, according to Ernst & Young, the auditing firm. In the Europe, Mediterranean and Asia region, nine IPOs that were expected to raise about US$4.7 billion (Dh17.26bn) were postponed or withdrawn.
This is not to say that communications is the be all and end all. The recent Glencore IPO had some of the best advisers in the world, including a renowned financial PR consultancy. However, the response was muted. Even a decent offering with strong advisers will struggle if the market is not ready.
But communications is a critical element, and does not always receive the degree of attention that reflects its potential impact on an offering.
Last year, du announced a rights issue, when the markets were still reeling from an extended downturn, and equity market offerings in general were not happening. Add to that the fact that rights issues are misunderstood in the region as being a rescue tool for companies in trouble, combined with a relatively unsophisticated investor base, and it is clear that communicating the strategy behind the offering and the benefits to investors was crucial to the success of the transaction.
While the du rights issue required even more groundwork and education initiatives than usual, even the most straightforward transactions require months of communications planning and preparation. A comprehensive IPO communications campaign will begin months or even several quarters before even any preliminaries, such as the announcement of the company's intention to float.
It is likely that the three Iraqi telecoms operators have been in discussions with bankers and lawyers to prepare for their market offering. Hopefully they have also been advised well in advance to have a strong communications multi-stranded strategy in place to help them address the concerns of employees, reassure business partners and investors of the corporate strategy, and build investor appetite for the offer.
This is perhaps more relevant in these cases than most others, given the current environment both in terms of global capital markets and more local challenges focused on Iraq.
Beyond this proactive push behind a capital markets communications campaign, having a contingency plan in place should be part of any strategy to ensure business continuity, should the transaction be unsuccessful. Communications is critical in ensuring the company's corporate profile remains fully credible and strong. If handled properly, a company can even emerge from an unsuccessful transaction with an enhanced reputation.
Recently, the Axiom Telecom IPO was postponed in the final hours, despite being fully subscribed, because of concerns over after-market support. In this case managing the company profile in the eyes of investors, the media, the employees and the general public was vital in ensuring Axiom's ongoing operations were unaffected. The result was that the media and broader market recognised the company for making the strategic decision to withdraw rather than take too much risk.
The challenges that the Iraqi telecoms carriers face are significant, and while a contingency plan should be the first thing put in place, a fully comprehensive strategy is crucial.
Even when the markets fully rebound, communications will remain an essential ingredient in driving through the next round of successful IPOs in the Middle East.
James Hawksworth is an associate director with Capital MSL, which in the past 12 months managed the communications around the equity offerings of du, Wataniya, Nawras and Axiom Telecom