A surge in demand for GVS’s filtration products has helped to push its long-aspired IPO over the line.

Mario Saccone

Mario Saccone

When Covid-19 hit Europe, myriad businesses – from fashion houses to car manufacturers – made headlines for making masks, ventilators and other equipment to help fight the pandemic. What went unsaid was that the official producers of these items went into overdrive.

As lockdowns closed businesses and forced many to work from home, the services of Italian-headquartered GVS – which makes, inter alia, protective face masks and filter components for respirators – became more essential than ever.

Minimal disruption

“Our first priority was the safety of our people,” says chief financial officer, Mario Saccone. “We implemented protocols that ensured they could continue to operate without any workplace risks – not just in Italy, but in all our plants all over the world.”

Of its 13 workshops, spread across seven countries, the only pause was in China for 10 days in January and February. This efficient response primed GVS for minimal disruption worldwide. “As Covid-19 spread, all our other plants applied the same protocols, which meant they didn’t stop production.”

The company’s second priority was to ramp-up production to meet demand. “We introduced 41 new lines – 23 for masks and 18 for air filters in the medical sector – and to support this production we hired more or less 500 people over four months,” explains Mr Saccone. All plants started making masks (an activity normally limited to the UK, Brazil and Romania) and began to receive orders from new categories of buyers.

“Those companies that started to produce respiration machines to support hospitals generated, in a short period of time, a new need for air filtration kits,” he says. “This led to another wave of demand for our products.”

Decades in the making

This surge in sales was the perfect set-up for GVS’s long-planned initial public offering (IPO). The company started talking with its banks in June 2019, but its journey to going public actually started two decades ago. In 2001, the family-owned and operated business sold a minority stake to local private equity firm B Group. In 2011, it did the same again with Mandarin Capital Partners. “These ownership decisions were made to develop GVS’s management style and become more aggressive with acquisitions,” says Mr Saccone. “But they were also made with the idea that, sooner or later, we would go public.”

In September 2019, GVS held its kick-off meeting with bookrunners Goldman Sachs and Mediobanca, and advisor Lazard. Its IPO prospects were clearly backed by strong financials. Sales were growing 15% year-on-year, while its earnings before interest, taxes, depreciation and amortisation margin was increasing at an even faster rate. Following the unexpected boon in sales over the first half of 2020, GVS could forecast to investors a revenue increase of 23% to 41% on 2019. Speaking to The Banker in August, he held firm on these figures: “We are confident, in the current scenario, that we can stay at the top of this range.”

Management was not daunted by the state of Europe’s primary equity market, which had been all but closed since February. They were confident the business’s quality and resilience set it apart from other IPO candidates which had decided to postpone. “The only worry was if we were ready to explain this to the market,” says Mr Saccone. “But, in the end, our numbers demonstrated it. They confirmed our message, and it was something that investors understood very well during discussions.”

GVS was not, however, completely immune to this year’s market turbulence. “For three or four months it wasn’t clear if we could close the deal due to the volatility,” he says. “But, in May, the market started to operate in a more normal way, meaning we could launch with just one-month delay.”

In the second week of June, GVS conducted its virtual roadshow at a price range of €7.00–€8.30 ($8.30–$9.90) a share. The order book was six-times oversubscribed at the final price of €8.15, valuing GVS at €1.43bn. On June 19, it listed €500m worth of equity, becoming the first company to debut on the Italian Stock Exchange in 2020 and Europe’s second biggest IPO of the year.

The shares jumped some 20% on the first day of trading and continued to perform well in the aftermarket, prompting bookrunners to exercise their greenshoe option and sell another €73m of stock in late June. With 40% of its equity now listed, the deal gives investors sufficient liquidity while leaving voting control with the founding family.

International success story

As a family-owned medium-sized enterprise, GVS falls into that category of business that has kept Italy’s economy humming for decades. Yet it’s anything but a domestic company: 95% of its sales are overseas, with nearly half in the US and one-fifth in Asia. Its IPO investors are similarly diverse, with 30% hailing from the US, nearly half from the UK and just 4% from Italy.

Its inorganic growth strategy, which focuses on foreign targets, suggests its operations are set to internationalise even further. “One reason for the IPO was to increase our visibility and have more instruments to face more important acquisitions going forward,” says Mr Saccone. Indeed, the success of its listing puts it in good stead to meet this goal.

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