A steady stream of initial public offerings (IPOs) that raised about HK$450 billion in Hong Kong last year points towards a bright future for local accountants, legal firms and investment banks that help companies achieve their public listing aspirations.
"Working on IPO projects can be both challenging and rewarding," says Edmond Chan, PricewaterhouseCoopers (PwC) partner. He says navigating the complex procedure of taking a private company public involves a number of different stages requiring close cooperation between the financial services industry and the legal profession.
At the outset, accounting firms such as PwC work with clients to determine listing strategies and help to structure financial reporting processes that meet regulatory and listing requirements.
"There are a lot of changes that need to take place before a private company can become public. Helping a client prepare for an IPO is not just a simple set of procedures," Chan says. "The key is to understand our clients' businesses and help them to prepare for their IPO from a tax, finance and internal control perspective. The process requires a lot of industry knowledge, analytical skills and, most importantly, common sense."
Chan says normally it takes nine to 12 months to complete an IPO. Accounting firms working with clients on IPO preparation can be involved in the reorganisation of business and group structure for listing purposes and identify strategic investors to provide capital to enable the company to proceed to the IPO stage.
Chan says within PwC, finance professionals could apply to join the firm's Capital Market Services Group where they can specialise on working on IPOs and further their careers. "Employees with Hong Kong IPO experience, who wish to work in Europe or the US where they can help global companies list in Hong Kong are always warmly received," he says.
Despite the optimism, erratic stock markets and a recent series of accounting irregularities - involving mainland publicly traded companies listed in the US - has highlighted the challenges for auditing firms that work with mainland clients. Quick to distance Hong Kong from unwanted attention, Charles Li Xiaojia, Hong Kong Exchanges and Clearing chief, stated several times that Hong Kong has a robust system for vetting IPO candidates.
As the Hong Kong stock exchange seeks to attract more global companies and to improve its competitiveness among the major international stock exchanges, the city's financial services and legal firms have found the need to hire and train employees with specific industry knowledge.
An Ernst & Young report says the current surge in Hong Kong listings marks a trend in economic growth that has dominated global IPO activity over the past two years. According to recruitment firms, the volume of work created has seen legal firms strengthening their capital market legal teams through recruitment and key appointments.
According to Astbury Marsden, IPO activity is contributing to recruitment and rising salaries. The finance recruitment firm says efforts to retain and recruit new staff are pushing up banks' salary bill by as much as 25 per cent. "IPO activity is one of the key areas responsible for rising salaries," says Jonathan Nicholson, group managing director at Astbury Marsden.
While lawyers and auditors share in the due diligence aspects of an IPO, it is the investment banks referred to as IPO sponsors that study the company and ultimately underwrite and sell the offering to investors.
Ashok Pandit, co-head of equity capital markets, Asia at Deutsche Bank, says good communication and co-ordination is critical to the success of any IPO. He says at Deutsche Bank, as soon as a mandate is received, a deal team is appointed to oversee and execute the transaction. "The team will also help the IPO candidate company confirm the working group, which include legal counsels, accountants, and all relevant third parties," says Pandit.
He adds that the roles and responsibilities of all participants will then be formalised and the issuer is briefed on the listing process and detailed timetable and work streams. "The lead banks or the global co-ordinators are responsible for ensuring a smooth execution process and defining clear roles and responsibilities of the different working groups."
Pandit says key skills needed are strong regulatory and sector knowledge, good people skills, communication and organisational skills, plus a deep understanding of equity markets.