IPO Success Stories: Der Weg von Frequentis an die Wiener Börse – mit CEO Norbert Haslacher

Thank you for the invitation. Yes, it's nice that you are here.

Yes, I must say, the IPO was of course a huge step for the Frequentis group. A great team effort made it possible, and the IPO has definitely significantly increased the professionalism of Frequentis, and we benefit from many additional stakeholders such as investors, analysts, and also more public visibility to reflect on ourselves more strongly.

Yes, I must say, anyone who knows Hannes Bardach knows he is an entrepreneur with heart and soul, and with hard work and a lot of common sense, but also cleverness, he understood how to develop new products and regions, and one gift he definitely has is to correctly assess the market and customer direction, but above all also to establish a corporate culture characterized by appreciation of employees, and we on the board have continued this path since 2018 and developed the group further on this good basis.

Well, the objective was to ensure financial independence and the sustainable development of Frequentis as a listed family company. Key points for this are certainly our solid business model and our comprehensive customer base. And direct access to the capital market ensures the company financial independence on the one hand, but also flexibility for further expansion and addressing this billion-dollar market that is global and available to us, and where our solutions in the safety-critical area fit well. And the capital market simply offers us better opportunities to finance large investments, especially in the areas of innovation, technology, and also markets.

Yes, we wanted to anchor ourselves not only on the Vienna Stock Exchange, but also on the Frankfurt Stock Exchange, so that we are also open to the larger German capital market. The feedback from German investors is also very positive that we are listed in Frankfurt. And why Frankfurt? It could have been somewhere else. We chose Germany and Frankfurt because we have very important large key account customers in Germany, in all five market segments that Frequentis addresses. And Vienna, because it is simply our home stock exchange, and I believe that the Frequentis brand has higher awareness in Austria than in Germany. But I have to honestly say that the dual listing is neither administratively complex nor very cost-intensive thanks to EU regulations. So it's all manageable. We pay, in addition to the fees for the Vienna Stock Exchange, only additional costs for the listing on the Frankfurt Stock Exchange. In Vienna, we are listed in the highest segment, the Prime Market; in Frankfurt, in the General Standard. And our home member state is Austria. And because we are listed in the highest regulated segment, the Prime Market, in Vienna, the regulations of the Austrian Stock Corporation Act and the Austrian Stock Exchange Act apply to us. Like all other stock exchange-listed companies in the EU, we also fall under, for example, the Market Abuse Regulation. Another aspect I always like to mention is that we operate in the safety-critical area. Redundancy at the stock exchanges doesn't hurt either.

Yes, I must say, due to the regulatory requirements, which are a lot, I must say, but also due to the dialogue with the capital market, it has felt like an even stronger professionalization of the company compared to without a listing. And the listing has given us an additional boost in terms of visibility, I must also say. A stock exchange listing with all its extensive regulatory requirements creates trust among customers, suppliers, but also employees, and also with M&A targets that you may have in sight, which is very helpful when announcing acquisitions. Since the IPO in May 2019, we have now bought eight companies or taken stakes, and this proactive search for interesting M&A opportunities has also become part of Frequentis' strategy. The IPO certainly brought that with it. We have new additions in Germany, Spain, Italy, Australia, Canada, Finland, which shows our diversity and internationality. And the M&A activities serve to complement our product and service portfolio and, above all, to expand our international presence. And that is certainly a boost that the IPO gave us.

Yes, we haven't tried that yet, I have to honestly say, because we have always had a very high net cash position. We are very sensitive when it comes to our money, and we always had a good endowment to pay for the companies from cash. No share swap was necessary.

So I must say clearly, in all the considerations that the Bardach family and we jointly made, one thing was always clear: the character of the company, Frequentis as a globally operating family company, must absolutely be preserved despite the IPO, because we have an enormous advantage from the stock exchange listing and being a family company. Family companies are generally always very long-term oriented, thinking in generations, always building a good foundation for the next generation. And there are also some of the most successful family companies that are simultaneously listed on the stock exchange. And Bardach always had a special concern to manage the generational change himself and to carry it out in a timely manner, and not to be surprised by it.

Yes, I have to honestly say, this idea of going public had certainly existed for 20 years. And Mr. Bardach was at that time — I can remember this story well — he was at Stanford University in California and learned as part of his management training that listed family companies are the better managed companies. And in Europe, this insight was confirmed to him in recent years through various courses and seminars. So he dealt with this topic very, very long, and the decision to go public actually matured in 2007. So in 2007 he already had the concrete vision to support our growth course in the form of an IPO. However, you know, then the financial crisis came and the global economic situation was too unstable for an IPO. A confirmation was that Frequentis had built up special management methods. And that was also a good story for the capital market, that we had grown healthily for 30 years and were economically successful every year. I think there was not a single year in the last 30 years where we were not profitable. And so it ripened towards 2019 that we said, now we use the opportunity. The wind was not good then either, I have to honestly say. There were very, very few listings at that time, and I think Marinomed and we were the only ones, besides a few technical listings, that actually made and carried out an IPO. And yes, of course a huge highlight for us to finally have achieved it. And in all considerations, one thing was always clear: the character of Frequentis as a globally operating family company must always be preserved, and that is a story that investors liked very much.

I have to say, unfortunately, several times a day. Yes, I need to get out of that habit again, because of course I am always interested in what's happening, how Frequentis is doing. I can't influence it, but I am still, I admit, I look at our stock price certainly three, four times a day, on both stock exchanges.

Yes, I think once you've made it through the IPO, which is hard enough, I think you have to celebrate big. That's the first activity I can only recommend, because an IPO is an enormous effort. And then it's about understanding the type of investors, what investment strategies they pursue, and building the right communication about new profits, new deals, new partnerships, successful projects. So I think the topic of communication towards the capital market is a very important one, and not to be too shocked by the stock price, because those are all momentary snapshots. We have already had a few dips where I had no idea why. Then there was someone who sold, and that day there was less demand, so the price went down, and then two weeks later it recovered and even became stronger. So it's just the way it is on the stock exchange, you can't influence it. You can only try to have a good communication strategy with the right information at the right time. I'm not talking about insider information, which is legally regulated, but about basic information, and not to let big fluctuations disturb you.

I believe that those who are invested in us know our business model, and we have a very resilient and stable business model, with good growth rates and in an area of megatrends, namely mobility and security, which are of course intact today. Therefore, I believe that our investors don't get particularly nervous, even when the market environment becomes nervous, because we have a very stable business model in the government environment, globally, so that our investors are convinced that it is not influenced by external market indicators.

Yes, I think it's good to have the option. And you only have it if you are listed, to use other capital raising measures and products. We ourselves are net cash. So, we finished last year with over 90 million euros in cash, we have paid for all our acquisitions from cash, so we are very well positioned in terms of net cash, and therefore bonds, emissions, or equity financing are currently not a topic for us. But generally, for other companies, it is an important tool when you get into that situation. Absolutely, these products are only implementable if you are listed. The company otherwise doesn't have that option.

Yes, you have summarized it completely correctly. So, first of all, I think it's important that there is a certain company size, so that you can argue well that it's not a one-day fly, but that this company already has a certain track record and a business model that you can believe in. From that certain company size, it makes sense to think about an IPO. If it's too small, I think it's very difficult to think about it. You can always think, but to actually implement it. With the IPO, you have additional financing instruments in hand, as you say, but it also increases public visibility, which might also be helpful for the business model if you gain public visibility. But also, what is very important, in terms of attracting new employees, it's a good argument, because if a company is listed on the stock exchange, it naturally shows a certain strength, it shows a certain internationality, and of course a strategy, because I don't think an investor today would invest in a company without being convinced of its strategy.

Yes, it's hard for me to say, I don't want to invent anything, because we never really had big problems in attracting employees. At our Vienna location, out of the 2200 employees worldwide, about half are based there, and we had about 4000 unsolicited applications per year. So we were actually quite well equipped with applications before and after the IPO. But what I think was more important was the topic of existing colleagues who have been with the company for a long time. I think for them, it was also a very important signal that the company is now listed. Of course, they are now partly busy with more regulations and reporting, but that has to be accepted. But it also shows the strength of the company to be on a stock exchange and to hold its own against peers and the market. That gives people security that the company is doing well, and I think that is a good indicator not only for new colleagues but also for our existing team.

So, I have to say, I can only say that you have to start thinking as early as possible about what is all necessary to even be able to work out the formalities for an IPO. It's not just about the prospectus, which is an extreme effort, drawn up with a lot of legal advice, so that you tell potential investors the truth and don't exaggerate. Yes, there is also due diligence. So everything is checked multiple times. Many are not aware that they have to switch to IFRS for their accounting before going public. So that is often necessary. That is also a huge effort. And also not to forget the IPO itself. Yes, I can tell from my own experience of the roadshow. The last weeks before the IPO, we were extremely busy traveling. You can plan for that. Yes, about 10, 14 days. I remember, in 9 days we presented the Frequentis stock in Vienna, Frankfurt, Zurich, Paris, Munich. So we were constantly on the move, presenting at more than 100 presentations. So you tell the same thing 100 times in 9 days. You have to be careful not to show too much wear and tear. But it was a challenge for us. And what was also an art, I will never forget, in England with an investor who told me, 'I see 15 companies today. What can you tell me so that I still know who you are in the evening?' So you have to keep that in mind. These people see many, many companies that day, and at the end of the day they have to present a decision template to their board or decision-making bodies. So that a Frequentis share is bought, or they get into the book for an IPO. That should not be underestimated. I think that storytelling and the red thread in the story are very, very important. Probably more important than anything else to be able to present the company well.

Yes, I think it's important to lower the hurdles a bit, especially regarding reporting obligations on a quarterly and half-yearly basis. For us, for example, it was very important in Vienna that there is an index where we have half-yearly reporting, because in our business model with projects, quarterly reporting makes no sense at all. It is an enormous effort to produce these reports without providing more information or more value for an investor. So I think it's important to create framework conditions where companies can manage to meet the formalities and criteria, while maintaining transparency for those who want to invest in this company, because that is also important. And I think it's also important for the capital market that there is transparency so that investment decisions can be made based on facts. What I still believe is that the main reason for an IPO is if you as an entrepreneur are interested in the long-term development of a company and are not an exit-driven entrepreneur. Because nowadays there are many who say, 'I found my company and sell it in 10 years.' I don't know if the IPO is the right thing for that. I can't judge, but for those who think in generations and want to build something for the next generation and want to leave something behind, I think the IPO is definitely an instrument that opens up professionalism, stability, and also capital access for a company to finance further sustainable growth without needing a bank. That doesn't mean it's bad to have a bank for that, but it's simply an alternative. And I think that is a consideration that every entrepreneur must make: What is my goal? Do I want to build something for the next generation, or do I want to build an exit-driven investment or company? I think that would probably be the first step of the consideration.