Mainstream BPO is looking to raise a relatively modest $10 million through an IPO involving the sale of up to 30 per cent of the company’s shares. The market capitalisation of what is arguably Australia’s largest third-party administrator for fund managers is expected to start at between $30-35 million.
The IPO, first flagged in May by founders Byram Johnston and Martin Smith, who will retain the bulk of the other 70 per cent of shares, will provide capital for further acquisitions and organic growth both in Australia as well as Asia, where the company has established a foothold. Johnston and Smith have half of their respective holdings escrowed from sale until next year’s results are announced and the other half held in escrow for 24 months after listing, which is expected on September 23. The offer closes on September 15.
The prospectus says that Mainstream BPO had funds under administration of about $50 billion as at March this year from 70 clients, who are mostly boutique or privately held fund managers, the largest of which is the Magellan group. Those contacts should make the capital raising a fairly simple affair.
The company, which has three main operating units, generated revenue of $14.4 million and net profit of $237,000 in the year to June, 2015. It is forecasting a healthy increase in revenue to $21.58 million in 2016, with a net profit of $2.39 billion.
The IPO follows the successful listing of competitor OneVue last year and runs ahead planned IPOs by several other financial services infrastructure businesses such as SMSF software company Class Super in a few months time. Financial services companies are considered to be in a sweet spot in the economy and the people who sell shovels (service providers) to the gold diggers (fund managers) are in a good position to provide consistent returns from the sector’s growth.
Mainstream BPO’s three business units are:
> FundBPO, which provides fund administration services for investment managers
> SuperBPO, which provides superannuation administration services for superannuation trustees , and
> ShareBPO, which provides share registry services for listed companies and ETFs.