You might know that a company conducts Initial Public Offerings or IPOs to raise funds. It offers its shares to the public and thus becomes a public company from a privately held company. The syndicate members play a major factor in the process.
Who are syndicate members?
Syndicate, in simple terms, means a group formed by people or companies with similar interests. Syndicates are formed for various reasons in the corporate sector. For example, in the stock market, a syndicate is formed by a company interested in bringing an IPO.
Suppose a company, ABC, wants to bring an IPO. This company would now approach an investment bank, XYZ, to help ABC with its IPO. XYZ can either manage the entire IPO process or take other banks with it and organise an IPO for ABC. Thus, a syndicate would now work for ABC until it puts forth its IPO in the market. Â
Types of Syndicates
Various kinds of syndicates are formed to perform different yet important functions of the IPO.
1. Lead Managers
Also known as merchant bankers or book builders, lead managers are the most important part of an IPO. The primary function of lead managers includes drafting the prospectus and preparing the underwriting agreements. In addition, they work on negotiations that would bring higher benefits for the company, i.e., the issuer.
2. Co-Managers
Co-managers are not as important as lead managers, but they, too, are important for the better functioning of an IPO. Co-managers are the advisors to the company. They help the company analyse the situations better and thus help them take better decisions.
3. Book-Running Lead Managers
Book-running lead managers are an assimilation of lead managers and co-managers. They help with the underwriting prospectus and distribution information and act as guidance and assistance to the company in the entire process.
Importance of Syndicates
Syndicates play a very important role for a company in its IPO. They are the ones who help the company prepare its prospectus. A prospectus is an official document that encloses all the important details of a company. This prospectus is then published on the official site of SEBI where you can check a prospectus of any company before investing in it.Note – Looking into a company in depth before investing in it is the first step towards intelligent investment. Thus, Shoonya brings you its advanced comparability tools. With Shoonya, you can look into a company’s risks and compare two companies to analyse a better option for yourself.