Deals of the Year: Successful IPO a ringing endorsement for Halogen

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Most people would probably associate a $63.5-million IPO with the colour green – as in money.

Pete Low is the chief financial officer of Halogen Software.

By David Sali

But for Halogen Software chief financial officer Pete Low, the firm’s hugely successful debut on the TSX last May makes him think of orange.

For months before that, most of Mr. Low’s workdays were consumed with the business of taking Halogen public. Every day, he’d add to his growing list of tasks required to make the IPO happen, noting them in a little orange book.

That mountain of responsibilities included everything from creating a team to write the prospectus – the company summary alone ran 20 pages – to ensuring that the firm would be ready to adhere to a raft of new policies and government regulations.

“I guarantee you, for four months, nobody saw me without that orange book,” Mr. Low said recently. “I could go on forever about how many different facets there are to managing it.”

The Kanata-based firm that manufactures employee management software considered a number of financing options, including securing additional private equity funding, debt financing and a private round of public funding, before ultimately settling on a public offering.

“We knew we would get a lot of following,” Mr. Low said. “In some ways, I would say the stars all aligned for us from January all the way to the IPO in May. This takes a lot of hard work, but it also takes a little bit of luck.”

The company turned to Sanjiv Samant, head of technology, media and telecom investment banking at Canaccord Genuity’s Canadian operations, to lead the search for investors. Mr. Samant, who had known Mr. Low and Halogen CEO Paul Loucks informally for a while, believed the time was right for the firm to go public.

“In Canada, we’ve had a bull cycle in the resource space for the better part of a decade now,” he said. “What we were kind of sensing prior to the Halogen deal was there was a radical shift happening where institutional firms were moving away from their reliance on investment in resource names and were actively looking for investment in growth names, particularly high-quality growth names.”

Halogen, with its “world-class” management team led by Mr. Loucks, had strong growth potential and a solid recurring revenue stream, making it the ideal technology company to test the IPO waters, he added.

The challenge, he said, was winning over investors hesitant to put money into a break-even operation. Halogen, like many human capital management firms, is still in a “land-grab phase” of securing long-term customers and as a result must funnel a huge chunk of its revenues back into sales and marketing, Mr. Samant said.

“Very quickly, we got the investor base here to understand that,” he said.

All told, Mr. Low said, his group held between 85 and 95 meetings with potential investors from the U.K., Canada and the U.S., sometimes as many as 10 meetings in a day.

In the end, it was worth it. The company far exceeded its stated IPO goal of $50 million. Its shares, initially priced at $11.50, soared more than 14 per cent on Halogen’s first day of trading on May 17.

“I think everyone was really happy,” said Mr. Samant. “It was a textbook example of how you want to price an IPO and how you want it to trade afterwards.

“I think everyone’s looking at this as a structural change now, where we’re going to have an extended cycle where growth companies can get financing. They’ve opened the doors for many companies down the road.”

See also: How Paul Loucks pivoted from Halogen’s ‘low point’ to this year’s IPO.

Organizations: Halogen Software, TSX, Canaccord Genuity

Geographic location: Canada, U.S.

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