How Do the Major Investment Banks Compete for IPO Business?

How do the major investment banks compete for IPO business? originally appeared on Quora - the knowledge sharing network where compelling questions are answered by people with unique insights.

Answer by Colin Stewart, Managing Director and Vice Chairman in Global Capital Markets at Morgan Stanley, on Quora.

Investment banks compete on a number of different fronts. First and foremost, the investment bank needs to convince the management and shareholders that they best understand the company's business and industry and can then best articulate that to the broad institutional and retail investor base. If one cannot display acumen there, one has no chance of winning the business. Next, the track record, experience and reputation of a bank are critical to winning IPO business. Most IPO companies are looking for a bank that has amassed experience through leadership of important and critical IPOs over a long horizon and through all types of market environments. That experience helps bring data and pattern recognition on investor behavior, which investors to target, investor reaction to key disclosed business metrics and valuation methodologies. Another important aspect to the IPO mandate decision is the background, experience and chemistry of the team at the investment bank pitching the business. The IPO is typically an intensive ~6 month process where insight, judgment and advice are constantly provided or sought.

Generally, an IPO company demands the best team that can answer its questions, provide the most accurate judgments, and be the steady hand guiding them through the ups and downs of the IPO execution process. Morgan Stanley wins IPO business in the technology space by having: a historical and sustained market share leadership in tech IPOs, strong experience at leading tech IPOs (especially high profile ones like Google, Salesforce, Linkedin, Facebook, Alibaba, ServiceNow, Palo Alto Networks, Workday, etc.), an excellent team of bankers with most of our leadership having been at the firm and in the same jobs for over 20 years, and consistent investment in our tech vertical across the banking and equity division.

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