Market researcher Ipsos made its markets debut with a €300m issue in September 2018, funding the acquisition of a stake in one of its rivals. David Wigan reports on the impact the deal has had on the company.

Antoine Lagoutte

Antoine Lagoutte

French polling and market research firm Ipsos has seen transformational change over recent years. Digital technology has heightened customer expectations and created an opportunity for game-changing innovation in its information-based business. In response, Ipsos has implemented its 'New Way' strategy, a fundamental redesign of its business model to align it with the changes sweeping the industry.

Digital technology has enabled research firms to move from traditional interviews and polls to an algorithmically driven approach that marshals vast amounts of information across numerous sources, including text documents, audio files and web pages. Ipsos’ new model has 17 service lines that include specialisms from neurosciences and web listening to data analytics and enterprise feedback management. Online and mobile surveys accounted for 52% of the company’s $2.01bn revenues in 2017.

“Our aim has been to accelerate our organic growth by changing the business to reflect the way our world is developing,” says Ipsos head of corporate finance Antoine Lagoutte. “We understood that our market is exposed to technology-enabled disruption and that we needed to be agile to compete and cater to our clients’ needs. By creating these 17 lines we can ensure that we continue to grow and implement best practice in all our operations around the world.”

Alert to changes

Ipsos is currently the third biggest market research firm in the world, behind Kantar and Nielsen. As technology reshapes the competitive playing field there is much talk in the industry of the potential for consolidation. In 2017, private equity firm KKR bought a 18.54% stake in Germany’s GfK, the fourth biggest industry player by revenues. Ipsos is alive to these dynamics and is keen to strike where it sees an opportunity.

“Our strategy has been to accelerate organic growth and, where necessary, to implement a policy of targeted acquisitions,” says Mr Lagoutte.

The company announced in July 2018 it had entered into an agreement to buy four global divisions of GfK’s custom research business for an enterprise value of €105m.

“This was a great chance to buy a business that represents more than €200m in annual revenues and which was a great strategic fit,” says Mr Lagoutte. “We financed through credit lines, which worked very well. However, in the longer term we felt that we would be better served through longer maturity debt.”

Ipsos had net debt of €464m at the end of June, and net debt-to-shareholder equity of 49%. The company’s net debt-to-Ebitda (earnings before interest, taxes, depreciation, and amortisation) ratio was 2.1 times.

“We were comfortable with leverage up to three times Ebitda, but not so much that none of our loans extended beyond 2021,” says Mr Lagoutte. “Given our opportunistic strategy we felt it would be a good thing to try to extend, and with that in mind we were keen to issue an inaugural bond.”

Late window

After discussions with its banks earlier in the year, Ipsos decided against getting a credit rating. However, it carried out non-deal roadshows in Paris, Frankfurt and London. In the end there was no suitable window in June or July, so the company waited until September before making its move.

“Our idea was to issue a €300m security on a no-grow basis, which would more than offset the cost of the acquisition and would leave us some additional funding in case of other opportunities,” says Mr Lagoutte. “We decided on a seven-year maturity, which we realised might be slightly more expensive than bank debt, but which would give us more flexibility.”

As an unrated and inaugural issuer, Ipsos realised that it would need to price the bond realistically, and the team, which included Mr Lagoutte, Ipsos group deputy CEO and chief financial officer Laurence Stoclet and treasurer Philippe Bony, worked closely with joint global co-ordinators Crédit Agricole Corporate and Investment Bank, HSBC and Société Générale to market the deal and explain the company’s story. Commerzbank and Natixis were also bookrunners on the transaction.

“We originally planned to go on a Tuesday but after an investor call we decided to switch to the Friday,” says Mr Lagoutte. “We knew we would not get extraordinary demand, given that it was an unrated inaugural bond, but we took that into consideration on the price and we did reach our target.” 

Ipsos successfully sold the bond with an annual coupon of 2.875%, representing a spread to mid-swaps of 240 basis points.

“Investors felt that €300m was sufficient to ensure the bond was liquid and in the end we were very happy,” says Mr Lagoutte. “We are now pretty well funded on a good timeline, and are ready to move forward.”


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