Valuation for IPO

Initial public offering or IPO is one of the major platforms that companies use to raise funds in the market. Independent valuation of assets is a vital element of an IPO for most stock exchanges across different jurisdictions, with some even making it mandatory.

Plant and Machinery
Plant, machinery and equipment often make up a significant part of a company’s overall investment. For manufacturing companies, this type of asset frequently exceeds the value of real estate assets. Hence, machinery valuation is often required in an IPO, especially for merger and acquisition (M&A) activities that are conducted prior to listing.

Financial Assets
Issuers frequently offer their employees share options to motivate staff upon listing. In such cases, a valuation is required to reflect the offering’s fair value in the accounts. Issuers may sometimes tender convertible bonds to get funding prior to listing; such would also require fair value assessment for financial reporting.

Others
Valuation and consultancy of different assets may be required from time to time, such as due diligence for M&A, and fair rent opinions for lease transactions between connected parties. As part of Jones Lang LaSalle, we can provide clients with other consultancy and advisory services, including agency leasing, investment sales & acquisition, facility management, property & asset management, project & development services, research and strategic consulting.

By partnering with Jones Lang LaSalle, we can provide clients with property consultancy and advisory services, including transaction support, research and restructuring, and fair rent opinion for lease transaction between connected parties.

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* Chapter 5 of Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the ‘Listing Rules’), currently states:

5.01	Valuation of and information on all the issuer’s interests in land or buildings (‘properties’) are required to be included in a listing document issued by a new applicant.
5.02	In the case of an acquisition or realisation of any property, or a company whose assets consist mainly of property, where any of the percentage ratio (as defined in rule 14.04(9)) of the transaction exceeds 25%, then a valuation of and information on such property must be included in the circular issued to shareholders in connection with the acquisition or realisation.
5.03	In the case of an acquisition or a realisation of any property from or to a connected person, a valuation of and information on such property must be included in any circular issued to shareholders in connection with the acquisition or realisation.
Other jurisdictions such as Singapore, London and New York (NASDAQ) also frequently require valuation of a company’s real assets prior to an IPO and for further valuation in regard to M&A activity afterwards.

What role can Jones Lang LaSalle Sallmanns play?

• Advisor to state-owned enterprises – e.g. land use rights vs. value recognition
• Advice on restructuring of land holding for potential listing companies
• Valuation of land, buildings and structures to appropriate market value
• Co-ordination of all international property asset values in recognised format
• Accredited report presentation in recognised format to regulator
• Valuation of other assets (business valuation / financial instruments/ plant and machinery) for the financial reporting needs of the potential listing companies
• Liaison with other intermediaries including Exchanges relating to valuation matters