A float is not an end in itself but a new beginning, which brings with it a variety of unaccustomed challenges, disciplines and temptations.
The return to “normality” on the stock market has prompted speculation that retailers may be tempted to come to market.
However, as the credit crunch showed, quality control is not big banks’ strong suit. Greed takes over and temporarily blinds the participants to life’s realities. Had Sports Direct approached me first, my advice would have been very direct - “you’re not ready yet, go away and have a cold shower”.
Obtaining the best price is not necessarily the optimum outcome. A float is not an end in itself but a new beginning, which brings with it a variety of unaccustomed challenges, disciplines and temptations.
The higher the price you value your business at, the higher the rating it commands and the higher the expectations investors will have of growth. This almost inevitably leads to unrealistic demands and disappointment, which the City hates and punishes severely.
What can exacerbate this situation is when senior management start to believe the rubbish written about them as part of the pre-float hype that, at a time when the process also takes them away from day-to-day management, is a recipe for disaster. The old maxim that you should leave something for the next man is wise counsel.
Think of a public listing as a marriage. You have to live with the consequences for better or worse, and feel comfortable waking up in bed with your adviser/broker after the honeymoon.
A public listing is not onerous if you choose the right advisers who will give you sound, objective long-term advice, manage your new relationship with shareholders and the City and publish the best research on your company - enabling investors to understand the business, its place in its market and its growth potential.
They will manage expectations to avoid surprises and shocks and, ideally, enable you to produce financial results that please the market. What the City likes is not necessarily the fastest growth rate, but consistency and predictability.
They will also manage the information flow and, again, what pays dividends is consistency. Companies must resist the temptation to reveal all when times are good but clam up when things go wrong.
While market conditions are important, and it is noticeable that the market is now worrying about next year and beyond, rather than enjoying the relief that this year didn’t turn out to be as bad as feared, there is almost always appetite for companies with good growth prospects.
In this respect a proven retail concept with a good roll-out story over a five- to 10-year period should be a perfect candidate.
Management has a simple choice. Do you wish to emulate retailers such as DFS or Dunelm, or do you run the risk of following in Mike Ashley’s footsteps?
You have been warned. Life as a public company can be a nightmare, but with the right preparation - and the right adviser to hold your hand - it can be a dream.
John Richards is a retail consultant at Cenkos Securities