Giles Distin
Cybersecurity matters for every business and if something goes wrong that will not be a private matter. The public will almost inevitably hear about it and that is going to impact quite likely directly on your share price.
Carly Gulliver
What are people talking to their lawyers about when it comes to tech? Welcome to Inside Tech Minds from Addleshaw Goddard. In this podcast, we're sitting down with technologists, investors, business leaders who are at the heart of the biggest tech deals, innovations and disputes. I'm Carly Gulliver, let's dive into today's episode. It's brilliant to have my colleague Giles Distin, Capital Markets partner with us today on the Inside Tech Minds podcast. Hi Giles, how are you doing?
Giles Distin
Fine, thanks Carly, thanks for having me.
Carly Gulliver
It's absolutely brilliant to have you here. I know from our conversations we've been having about the markets, what we're seeing, particularly in tech, in that public market side of things that today we're going to have a really interesting discussion. I'm looking forward to it.
Giles Distin
Me too.
Carly Gulliver
So, I mean, Giles, let's start by just giving our audience a bit of background on you. What's your role at Addleshaw Goddard?
Giles Distin
So I'd call myself a public market corporate lawyer and that means I advise on corporate activity involving companies listed or looking to list on the London Stock Market, so for example, I'll advise on things like IPOs, secondary offerings and public company takeover bids, and also advising boards of listed companies on the sort of things that keep them awake at night from a sort of legal regulatory risk perspective.
Carly Gulliver
So that sounds as if that must keep you quite busy.
Giles Distin
Yes, I mean, there are, like with any corporate law, really busy times, as you’ll know. We can get on to some of the detail at the moment as to how busy or not the UK public markets are. There's lots of commentary out there as to what's going on in the London Stock Markets in terms of IPAs and secondary offerings. Takeover bids, in particular in the UK, remain really busy so that keeps quite a few of us here really busy. Really popular location, the UK, in terms of takeover activity. We have one of the most open takeover markets in the world. You'll see some countries are sort of quite protectionist, let's say that in terms of their outlook or in terms of the way their regulation is set up. We're not that way. We really welcome all sorts of acquirers for our listed companies. There's lots of activity in that sort of respect.
Carly Gulliver
And I mean takeover, that sounds very ‘Suits’, you know, very hard and fast, you know, end of the corporate law spectrum. But for those of us who aren't as familiar with the takeover and what it is, you know, what are we talking about when we say takeover?
Giles Distin
Yeah, well, first of all, it's a good job then the listeners won't be able to see that I'm wearing a suit so that's good start. Yes. What are we talking about with the takeover? So the starting point is the target company is usually a stock market listed company and has, you know, potentially hundreds, potentially thousands of shareholders and therefore it's not like a private company deal. A private company deal you might be dealing with one, two, a small number of shareholders all signing up to a sale and purchase agreement, that's not going to work on a takeover where you've got to somehow work out how are you going to acquire the shares of thousands of shareholders, many of whom are not on the inside of a deal, they're not on the board of directors. So it's a very different sort of process, often quite high profile, but not always. You know, some of these companies being taken over and we could, this is the case in the tech sector as in any other sector. Some of these companies are actually no bigger or they're smaller than private companies, but their shareholdings are often very widely dispersed. So it's a sort of different mechanic. It’s caught by a different set of rules and regulations so that's the takeover code in the UK, which is administered by the takeover panel here in the City of London so it's a sort of different regulatory framework, a different process. Yeah. So, you know, in some ways, quite a different skill set.
Carly Gulliver
I mean, the podcast title Inside Tech Minds, so putting your tech hat on, what type of tech transactions have you been seeing at your end of the market, Giles?
Giles Distin
Yeah, so I mean, there's a range of things there. What I'd probably say is quite a few those companies, not necessarily deep tech, they're sort of heavily tech enabled, but sort of a variety of deals in terms of IPOs. So AG's Equity Capital Markets team here advised on the Beauty Tech IPO last year. That was sort of relatively high profile in a year when there weren't many IPOs. Going back a bit further, things like The Pebble Group, was a TMT business, which IPO'd essensys, which is a prop tech business. We were also involved in the IPO of AJ Bell, which is a sort of investor platform so heavily tech enabled, you know, tech is absolutely essential to that business. And then on the takeover front, I mean, many examples of companies which are either sort of deep tech or tech enabled things like Smooth PLC., Tungsten Corporation - that's a sort of software business, TP Group, is amongst other things, sort of electronics for the defence space amongst other areas. And actually some tech platforms, Nucleus Financial got taken over a few years back and then they took over Curtis Bank. So these sort of, I would say of tech platforms for investors have sort of proved quite a busy space.
Carly Gulliver
I mean that's a real broad church really, isn't it, when we talk about tech and the types of tech transactions you've been working on. And I mean, did you manage to pick up any themes when you look back at the nature of those transactions that that you've done?
Giles Distin
Yes, I mean, it is quite a broad church. I mean, what we often say actually in the sort of group that we're in, in the equity capital markets group is that actually in some ways our sector is sort of knowing those sort of listed company rule books. It's a different process as I described earlier for something like a takeover. So that sort of is our sector and we operate in a wide variety of sectors. Of course, tech is just one of those sectors which has been popular for us both in terms of IPOs and in terms of takeovers. I mean, the sort of key theme I'd probably say, you know, maybe I'm going to age myself, but going back 10 or 15 years, let's take something like a takeover. So in takeovers, it's a bit different to doing a private company acquisition, as I've mentioned. One of the things which is different is due diligence and not going to go into all the sort of reasons as to how the rules apply to due diligence and takeovers, but basically, the sort of result that that sometimes spits out is that the bidder is not always entitled to do so much due diligence on the target. Classic things like the target would say ‘We're a listed company. We publish lots of information in relation to ourselves. We don't expect you to do a detailed due diligence exercise.’ But one theme we notice is how much more important tech comes in those due diligence work streams. This is a proper, detailed, wide and deep exercise. It's not any longer just accounting and tax and legal DD. You will have a proper, fulsome, regulatory DD exercise. And of course, you can see how for some of these businesses, let's take this tech platform businesses, tech is absolutely essential in terms of how is the technology going to be integrated after the deal goes through. It's become a really, really important part of that DD exercise in a way which actually to us now isn't that unexpected, is it? It's just so essential to us as lawyers for our own business. It makes sense that it's sort of front and centre of some of these sort of public M&A deals.
Carly Gulliver
Definitely. I mean, that's been my experience as a, you know, private equity lawyer and working with both the institutions investing and also with founders who are building, you know, companies and going on that growth journey, taking investment and exiting. But the tech side of things, whether that's due diligence or actually how that features in the investment case, is ever more at the centre of everything. So, you know, go back a few years and some of the tech as a DD seemed to be at points, a bit of a tick-the-box exercise. Now it's front and centre in terms of what's the true investment case for this company, what does its trajectory look like? How impacted is it by AI? And then things like how resilient is the company from cybersecurity attacks, the reputational risk that we've seen in the media, it can be and is, you know, a very real threat. So I think it's fair to say that across all areas of the corporate spectrum, we're just seeing tech as a critical path item now, not a nice to have.
Giles Distin
I mean, I couldn't agree more with some of the things that you say. Some of the things that you say are absolutely equally as relevant on the public markets as they are on the private markets. I mean, those things you talk about things like cyber security. So you see what has happened with certain sort of listed companies who've had cyber-attacks and what that could do in terms of the impact on their business. You know, cyber security is so important that, you know, you don't need to be a deep tech business for this to matter. Cybersecurity matters for every business. And if you think about it in a listed company context, if something goes wrong with your cybersecurity, that will not be a private matter. You know, the public will almost inevitably get to come to hear about it and that is going to impact, you know, quite likely directly on your share price. These features become so important now for listed companies and AI similarly. What is AI going to do to your business, whether positive or negative? And again, playing into things like how attractive you are to investors, whether or not your share price is going to be negatively impacted if the public perception is that you're not adopting AI in an intelligent way.
Carly Gulliver
I mean, we saw that recently, didn't we, in terms of impact on the certainly on the US stock market into SaaS businesses. So that software as a service business and how that's been impacted negatively by the Trojan horse of AI.
Giles Distin
Yeah, absolutely right. For listeners who haven't quite been following that, you know, just a very significant impact, particularly in US markets in relation to sort of the SaaS part of the technology spectrum and concerns as to how AI was going to impact on some of those software businesses. We're not in a market all of our own in the UK. There's lots of news about that in the US, the sort of similar themes could apply in the UK for UK software companies. I mean, maybe I'm sort of not seeing it clearly enough, but when I look at that, I sort of think that's AI and SaaS businesses, but it could be AI and something else next. You know, SaaS has been picked out right now, but it's not just SaaS that potentially gets impacted by AI. I see that actually in the public markets as exciting. That's an exciting opportunity, particularly companies really adopting AI in an intelligent way or just AI businesses, pure deep AI businesses coming to market. I see that as exciting, but also, you know, there are macro risks there that, you know, AI being so potentially so disruptive. How does that impact on a whole range of companies that are already listed with questions as to whether or not their business model is sufficiently robust to deal with AI.
Carly Gulliver
So do you think we might see a positive trend then? Because I think when you were mentioning some of the deals you've worked on in the past and what you've seen, you were talking about very much tech platforms which are more tech enabled type businesses rather than deep tech or, you know, for example, AI native companies. But do you think we'll see an increase in that pipeline of true deep tech companies when it comes to the public market?
Giles Distin
I think we will. I think we will, although if I look at sort of most recent data, maybe that's not coming out so clearly. So in the last quarter in the UK, busiest quarter since 2021 for IPOs but when you look at those IPOs, they're not all tech companies. There are some tech and TMT businesses there, but they're not all, you know, either deep tech or maybe in some cases you might not even say they're sort of heavily tech enabled, but tech businesses are definitely interesting to the UK. It's just, you know, in a sense, we're potentially quite sort of well hedged across a variety of different sectors. I sort of think that some of the chatter about companies potentially looking to list or a dual list here in London. So let's take some big names, things like Visma - so that’s software, things like SumUp - card reader business, things like, you know, what is Revolut going to do? Are they going to dual list in the UK? And in some ways, wouldn't we think that was absolutely great news? So some of those, you know, sort of very well-known tech businesses will definitely get their share of attention. But I think the feature probably, I'd contrast this to the US markets, the feature is in the UK, you know, we're not just focusing on tech, we're focusing on a whole range of companies in different sectors and it's not just the largest businesses. So we would potentially be attractive to IPO candidates from across the world who are not mega cap companies. They are small mid cap businesses and London has had historically a successful track record on floating as sort of small and mid-sized businesses in a way that other stock markets potentially around the world wouldn't be so interesting. So let's take the US. US got a great name and rightly so for tech IPOs, but there will be a whole range of tech companies and other companies which are really too small to be of interest to the US markets for the purposes of an IPO. I mean, it's difficult to generalise, but you might think companies of less than, you know, 5 billion or less than 3 billion US dollars, opening market cap are just sort of below the threshold of interest of lots of US institutional money. So we can definitely see a relevance here of companies of a particular size that they will not go to the US. Lots of them will be tech companies, but lots of them won't be. And my prediction will be those companies, which even if they're not deep tech or adopting AI and other technologies in an intelligent way, those will be a attractive propositions for investors as potentially scalable businesses.
Carly Gulliver
I mean, you mentioned there that some of the advantages of if you were looking to list a tech company, some of the advantages of doing that in the UK versus the US, you know, things that you mentioned there around accessibility, around the smaller market cap size. Is that the same if any of our clients are thinking about the UK versus Europe when it comes to the markets and where to list their tech company?
Giles Distin
Yes, I would say sort of all markets are different and they all have to set out their own stall as to what is fantastic about them. I'm not going to necessarily start promoting the US and our European colleagues at AG can no doubt tell us why markets around Europe are absolutely fantastic as well. I think when we sort of understand where we are, it is just the case that London has been one of the sort of most reputable, one of the busiest markets for IPOs. That's going back a long number of years. And even though in recent history, last few years, there have been a relatively much smaller number of IPOs. I don't think anyone I've spoken to thinks that we're counting ourselves out here. We think the IPO market is going to return and when it does, we're just sort of predicting that London is going to be busy in most of those markets, or all of those markets potentially around Europe. If you look at things like the amount of funds raised, whether IPO or after IPO. So if it's after IPO, we sort of call these things secondary offerings. The amounts that are raised in London compared to other European countries are really significant. London is the leader there. I think there's probably more we can do in terms of IPO to boost the numbers here in the UK of number of IPOs. But the sort of thinking is there is still a deep pool of capital in London to invest in listed companies. I think the problem right now is although there is technically that deep pool, fund managers are being careful where they have that money as to where to deploy it right now. So at the moment, we haven't seen so many IPOs, we haven't seen so many secondary offerings as we have if we look back sort of many years previous where markets have been really, really busy.
Carly Gulliver
I mean, you mentioned there that there's been a smaller number of IPOs and some of the reasons for that and I mean a lot of that is around the macro effects economically, isn't it, versus just what we're seeing in the UK.
Giles Distin
Yes, there's some of that. You know, Carly, because you're a private equity lawyer, how well private equity is done. And my goodness, I mean, it is done incredibly well and hats off to private equity. If you look at this sort of balance, it's interesting. I don't have the stats in front of me, but I was reading some in relation to what that balance looks across the world. And if you look at something like the US, my understanding is the sort of capital raising between private and private equity and public markets in the US is relatively well balanced. Both of those markets, of course, very, very significant in themselves. In the UK, we're much more balanced now, very significantly more balanced in favour of private equity. But I do think we've got a good story to tell here in London. It's probably not interesting enough to go into the detail of what the regulatory overhaul has been here in the UK over recent few years, but we have just sort of undergone a very significant period of regulatory overhaul to make it sort of easier to IPO once you are listed to make the sort of regulation more proportionate, less onerous in terms of continuing obligations for companies listed on the London stock markets. And I think that's all great. That doesn't necessarily in itself create an IPO market or create a secondary offering market, but you sort of need to have a good regulatory framework to start with to sort of help encourage some of that behaviour. So I think we're very well set up. There are macro factors, you know, what has been going on in the economy and haven't we sort of thought it's almost sort of just one thing after the next. It was the Brexit referendum and the sort of upheaval after that. We then had a global pandemic. You know, we've had global tariffs. So we have had some challenges. I think, and I believe this is the case, that, you know, we are just learning to live with sort of regular turbulence. You know, that is the new normal and hopefully the public markets can adjust to that way of thinking to say, you know, turbulence is normal, you know, and one isn't going to sort of constantly hold back a sort of public markets activity until you get a period of calm because we just don't know when that period of calm is coming.
Carly Gulliver
Yeah, it's almost as if the uncertainty has become the certainty. So now we're moving more towards how do we do business in instability and you know, in environment which is less than perfect, but ultimately business has still got to carry on.
Giles Distin
The other thing to say is the sort of political backdrop now in the UK is just starting to look quite healthy. So, you know, whatever your political persuasion is, I've still got to sort of take off my hat to this government for actually talking up our stock markets here in the UK. That is really important. Stock markets anywhere are to a certain degree based on sentiment. If you're constantly talking yourself down, you probably know the result that you're going to generate there. But I think there's just been, and I'd say this for the previous government as well, towards the end of the previous government, they got it as well. We need to talk positively about London stock markets and regularly, we need to get this out into the sort of general knowledge into, you know, into all the media to explain how important stock markets are to the UK economy and just how positive those stock markets can be for companies looking to grow.
Carly Gulliver
I mean, absolutely. I know from, you know, my own career where, you know, having conversations with business owners and with founders, I think going back, you know, a decade ago, used to hear more frequently aspirations to, you know, ring the bell at the stock market to list your business. It has felt anecdotally over the past few years that there's been a lot less conversation around ambitions for listing and more towards ambition for you know, private equity investment or to do some other event, which I appreciate some of that is my bias of, you know, the sector of the market that I sit in. But I mean, do you think there's more to be done there in terms of raising ambitions for the business community to ring that bell?
Giles Distin
Absolutely, definitely. Much more to be done. I was mentioning the regulatory overhauls. We've got lots of that done. That's not completely done. It's work in progress. There's more that can be done. I mean, an example of that coming down the track, the digitisation task force, which is looking at sort of in the most, I'll call it, it is very general, but digitising the way the stock markets work. So that's coming down the track. I think that might be the end of next year where we're supposed to have sort of digital stock markets where we're not supposed to be relying on sort of paper certificates and like, I doesn't that feel like that should have been done quite some time ago? So we're not done on the regulatory and the sort of framework around the stock markets, but there's more to be done in terms of the sort of public perception of stock markets, getting the narrative and the media to turn around and talk positively. And I think part of this is an education for everyone. Literally, you know, some very wise minds around the City talking about educating young people, you know, from an early age in school, as they do in certain other countries to talk to them about the importance of public equity markets.
What role do those markets perform in any economy? Why are they so important to you as an investor who at some point in their life might want to retire and have some something to live on? What role do equity markets play? And I think there's a lot of people out there that would say if you're missing the equity shareholdings components, you could actually end up at the end of your life much the poorer. So there are some sort of education around investment, what are wise investments and we need to focus on that as well.
Carly Gulliver
You know, you've convinced me there of the story and aspiration around a listing. In terms of what our clients who are thinking of going down that road should be thinking about when they're coming to, you know, either prepare or consider whether they should do a listing, what would you say to those clients?
Giles Distin
Yeah, I mean, the first thing I would say is preparation is absolutely key. It is for any, as you know, obviously it is for any sort of major corporate transaction, major corporate event, but that's sort of doubly so if you're looking at an IPO. I mean, there are so many different workstreams to prepare for an IPO and these can take a long time. Part of what we were concerned about and that regulatory overhaul is to sort of remove friction. But still, even in our new world, you might estimate that an IPO is going to take six months, it might take nine months, it might take sometimes for larger, more complicated businesses over a year. So you've got very long lead times there. And preparing ahead will be absolutely essential. it's not surprising, therefore you've got the likes of the big four accountants and the like, going through these pre-IPO readiness exercises, often taking a significant amount of time to get companies prepared for what the public markets might look like. And of course they do look slightly different to how it would look like in a private company world. So we're not just talking about having all your sort of DD materials and everything like that in great shape. But you're looking at things like your financial reporting procedures, how robust are they? You're looking at your corporate governance framework and you know, who's on your board? What are the frameworks that you're going to apply to your particular company going forward? There's a huge amount of preparation. Don't underestimate how much preparation there is. There are ways to sort of try and smooth that process. The other thing is obviously in relation to your financials, only so much potentially that one can do about that. But obviously in the run-up to IPO, you want your numbers to look absolutely as good as they can be with a sort of upwards trajectory. And the timing of the IPO is often factored around that. If you've come out with audited accounts at a particular time, then you've got to get on and float within a particular time thereafter because investors will be looking at those financials. So working out in your year, where are those material financials? When are those material financials coming out and sort of building your IPO timetable around those financials?
Carly Gulliver
And so Giles, that's brilliant to hear. It sounds as if preparation is key. It can be quite overwhelming, but to go back to our theme that we discussed earlier, a conversation with you, if you're thinking about doing those sorts of things, would be invaluable because you can help our clients cut through that and triage the priorities in terms of what they need to do first and helping to map that process.
Giles Distin
Absolutely. And we've seen the exercise many, many times before, everything from small businesses to much larger businesses. So, we're here to help and there are others who can also help. I mean, when I look at IPOs in the past that have often sort of gone more smoothly, that's where actually the client has engaged someone to sort of work on their own home team, a sort of expert consultant that's brought in to help run the home team on the execution front I find that really valuable. Someone who has done IPOs, they're often sort of accountants or investment bankers, but someone who sort of understands these processes can sort of translate some of the jargon for the home team and the client. I often find that's really valuable to smooth the process.
Carly Gulliver
One question I ask all of the people I speak to on this podcast is what item of technology would you take to the Addleshaw Goddard tech time capsule?
Giles Distin
I mean, wow, that is so difficult. That's such a difficult question. If you've ever been to the Science Museum, there's a sort of display of ancient tech and I love that when I'm with my kids to point out things that now look so rubbish, so behind the times. And I just remember how at the time we thought that this was the greatest thing ever. So there were so many sort of things there that I have a sort of an emotional attachment to. I mean, one of the things was my computer that I used to use from what was it age of 10, 11, 12, so BBC, BBC Micro B computer, just a really, really basic computer. In fact, I found it in my mother's loft so it'd be very easy if you want in that time capsule. I've just brought it back to my house. It's just sitting there in pretty much pristine condition so you could have it.
Carly Gulliver
Brilliant. Well, we'll give it a service and we'll pop it in the time capsule. Thank you very much, Giles. It's been absolutely brilliant catching up with you today and really interested to hear the themes that you're seeing in the public market. Do you have any closing remarks?
Giles Distin
Other than to say thank you very much, it's been an absolute pleasure.
Carly Gulliver
Brilliant. Thanks very much Giles. Thanks for joining us on today's episode of Inside Tech Minds. If you enjoyed the conversation, don't forget to follow and subscribe on Apple or Spotify or even leave us a review. Thanks for listening and we'll see you next time.
