Impact of Initial Public Offering on Financial Performance of Mark and Spenser in UK Retail Sector

This research study focuses on the impact of Initial Public Offerings (IPO) on the financial performance of Mark and Spenser in the UK retail sector. The study aims to identify the importance and benefits of IPO, its impact on the financial performance of the company, and the challenges that can arise after IPO. The study also recommends effective strategies to deal with the issues that arise after IPO. The research methodology includes research type, approach, philosophy, design, data collection, sampling, data analysis, ethical consideration, and research limitation.

Research methods in finance
and accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
Background of study....................................................................................................................3
Research aims and objectives......................................................................................................4
Research Question.......................................................................................................................4
Rationale......................................................................................................................................4
Literature Review............................................................................................................................5
Theme 1: Importance and Benefits of Initial Public Offering.....................................................5
Theme 2: Impact of Initial Public Offering on the financial performance of company..............6
Theme 3: Issues faces by company that can arises after Initial Public Offering (IPO)...............8
Research Methodology..................................................................................................................10
Research Type...........................................................................................................................10
Research approach.....................................................................................................................10
Research philosophy..................................................................................................................11
Research design.........................................................................................................................11
Data Collection..........................................................................................................................11
Sampling....................................................................................................................................11
Data analysis..............................................................................................................................12
Ethical consideration.................................................................................................................12
Research Limitation...................................................................................................................12
Timeline.........................................................................................................................................12
CONCLUSION..............................................................................................................................14
REFERENCES................................................................................................................................1

INTRODUCTION
Background of study
Initial Public Offering (IPO) is basically a process with the help of which private company
go public by selling their stock to general public. In simple term, when a private company first
sell its shares to general public than it is known as initial public offerings. This allow the
company to raise the funds and capital from the public investors with the help of which they can
expand the business to both national and international level. It means this give greater ability to
company to expand and grow in the market. The impact of initial public offerings over the
business is such that they will able to enhance or increase their public image. With the help of
IPO, the business will come in the eye of government, local community, big investors or
financial institution and also customers (Wang and et.al., 2019). As a public listed company
because of IPO, they can also able to grasp the opportunity of merger and acquisition which
basically result into the reduction of competitors in the market.
In order to identify and analyse the impact of initial public offerings over the company
performance, the researcher has selected Mark and Spenser company of UK. M&S company
become a public limited company in the year 1926 in order to finance some new developments.
Mark and Spenser (M&S) is a British multinational retailer company having headquarter in
London, UK. Currently, the company offers variety of clothing, home products, food products to
its customers. The company was founded in the year 1884 and became public limited company
in the year 1926. With the help of this step, M&S company able to generate more funds and
capital from the general public of UK and use the same for their expansion. As per 2020 report,
there were 1037 stores of M&S along with the 472 other store locations situated around the
world which is because of the funds generated from general public. The company has announced
in the year 2011 that they spend around £600 million on its UK stores in the year 2011 to 2014
which is after they go public (Choudhary and Piparo, 2020).
In the year 2020, the sales revenue, operating income and net income of M&S company
was £10181.9 million, £254.8 million and £27.4 million (Eisenberg, 2019). Not only that, the
number of employee connected with M&S company as per 2020 data is 78000 employees. This
proposal will discuss the important and benefits of IPO in present time along with its impact over
the performance of company in order to enhance the user’s knowledge on IPO. The issues face
by company after they can arise IPO will also an aspect of this proposal.

Research aims and objectives
Aim:
 The aim of current study is to identify the impact of Initial Public Offerings (IPO) on the
company financial performance in the context of UK retail sector. A study on Marks and
Spenser.
Objectives:
 To develop understanding about the importance and benefits of Initial Public Offering.
 To recognize the impact of Initial Public Offering over the financial performance of
M&S company.
 To identify the challenge or complexity that can arise after Initial Public Offering.
 To recommend effectual strategies to M&S to deal with the issues arises after IPO.
Research Question
Q.1. What is the importance and benefits of Initial Public Offering?
Q.2. What are the impact of IPO on the financial performance of the company?
Q.3. What are the issues faces by company which is arises after Initial Public Offerings?
Rationale
In the current dynamic and uncertain environment such as Covid-19, businesses are facing
lots of difficulty in fundraising. It is because of the lack of trust of banks or people towards
private company. Presently, big investors want to invest their money in only those business
which are publically listed on any stock exchange such as London Stock Exchange. The impact
of which private companies need to pay higher interest rates on the bank loan which leads to
higher cost of capital (Basias and Pollalis, 2018). Thus, if any company wants to raise high
capital from the market in low cost then they have to go public via IPO. Hence, the present
research topic is significant for the private companies who wants to go public and arise Initial
Public Offerings. The IPO is also plays important role for the company in motivating their
employees because for public limited firms it is very easy to set up employee stock option plans.
The impact of IPO over the business in positive way is that they will get money which they
can further use it to grow the business without incurring any debt but on the other hand, the

negative impact of IPO over the business is that the owner will lose control because of share in
control. In the current period, Initial Public Offering helps the business to provide stock option
and other kind of compensation to their employees, gain higher market share, creating strong
portfolio. Hence, the scholar has selected this research topic to conduct and complete the present
research project in successful manner (Dodds and Hess, 2020). With the help of present research
study, the users will able to use an initial public offering to finance research and development,
hire new employees, build building, capital expenditure, reduce debt, acquire new company or
many more.
Literature Review
Theme 1: Importance and Benefits of Initial Public Offering
As per the views presented by the Espenlaub, Goyal and Mohamed (2020), initial public
offering is a term define as a fact that first time any organisation goes into the crowd funding and
approach people to invest in the business is denoted as the initial public offering in the business.
Initial public offering the term itself demonstrate the fact that this is the first time any company
is looking forward to ask people to invest in the business. Initial public offering offers numerous
benefits and advantages to the organisation. This provide the access to the huge amount of
undoing resources a capital to the organisation. Crowd funding become one of the core approach
company take in process to execute the business operation. The role of crowd funding is
allowing the normal people or general people to get a chance to invest in the emerging business
houses and start up. Crowd funding is among the major advantage organisations and firm s get
by approaching to ghee initial public offering. Further this is very first time company approach to
the people for the funding which also motivate and inspire many people to invest in the
company. Generally, the initial public offering is issue by the companies that are emerging in the
market hence, people are highly motivated to invest in such business ideas to gain healthy return
over the investment is made. The percentage of profit share company allocate is very small in
number as it is for the first time company is trying to offer rhea investment opportunity in
business. Giudici and Bonaventura (2018), has demonstrated the fact that the initial public
offering also creates an impact over the brand image and value of the firm in respective target
market. The positive effect of the initial public offering is also over the public image of the
organisation in respective target market. This favour to the company to cherish the brand value in

front of all the investors and stakeholders associated with the business. Initial public offering
also allows the stock options to the organisation. Company get to explore different stock options
with the use of initial public offering practice. Facilities related to merger and acquisition is also
accessible due to the initial public offering practice by the firm.
The criticism has been made by Li (2021), is such that this this entire process is highly
expensive in nature. This entire process result into the quit dilution for the owners. Equity is the
ownership in the organisation and due to this process the organisation face an issue related to
equity dilution in the organisation. Due to the equity dilution profits of the original investors and
owners get decline in the business. This entire practice result into the fact that the more
regulatory compliances are require to meet by the company as compare to the earlier positon of
business. The more number of ownership company allocate it will directly influence to the
liquidity of the business. The effect of more debts and equity is directly over the liquidity
position of the business.
Theme 2: Impact of Initial Public Offering on the financial performance of company
The illustration of the views projected by the Singh, Singhania and Sardana (2019), is such
that initial public offer create a direct financial impact over business. The role of the initial
public offering is such that the kre public offering allocate by the company the more dilution will
have to be done in equity of the organisation. Equity dilution directly reduces the share of profits
for the equity holders and the investor in business. This is important that at the time of the initial
public offering company share less amount of profit and ownership share so that business can
offer more equity in future when they will approach to the investors in future. Most of the
companies do a mistake when they approach the initial public offering which is that they tend to
give huge amount of ownership and share due to the fact that company was only at its initial
phase which do not motive ad believe the organisation that they will grow in future. The initial
public offering allow the organisation t get access of the huge finds and crowd funding option
that can allow the organisation to collect the heavy funding resources in business. Retail sector is
a massive and diverfieid business environment sector which involve the massive financial and
funding need that can favour to the company to tale competitive advamatghe in the market.
Funds can allow the organisation to undertake certain strategies that can offer strategic
development to the company. Further, public offering allows the company to prove the heavy

financial advantage and benefits allocator to the ines6or that further improve the brand value and
image of the organisation in the market. This is among the core advajatge initial public offering
create in long term that it allows the company to improve the brand value by providing effective
return to the investors. In long term the same investor invests in the business in order to get more
return form the business.
The criticism has been designed by the Zijiaa and Zhiyu (2021), over the fact that initial
public offering creates certain disaffect in long term over the business. Equity dilution create a
massive disadvantage for the organisation in long term. At the initial public offering company
always prefer to go for the equity share as debt will create a massive amount of burden of interest
and capital repayment. The capital that dilute by the company offer issue to the company in long
term that in longer duration company do not get much opportunity to raise funds in front of the
investors. This is important that company only dilute a very small amount of profit share at the
time of the initial public offering. All such organisations that dilute a very huge ownership share
face a big challenge in long term while raising capital in business.
As per the view of Valarmathi, Jossy and Babu (2018), the impact of IPO over the
financial performance of retail sector is that they able to overcome borrowing constraints,
bargain with the banks strongly and liquidity & portfolio diversification. It means going public
will affect the liquidity of a company stock along with the scope for diversification. Initial public
offering allows the company to raise the capital from the general public and big investors on
which the company need not to repay the capital. The impact of which, the retail sector
companies can use this funds for their business growth and expansion. Further, IPO also put
impact on the brand image of the company. It is because after IPO, the retail sector comes in the
eye of public, big investors, local community, society etc.
On the other hand, the Zhou and Sadeghi (2019), has stated that the most significant
impact of IPO on financial performance of company is that they able to increase their sales
revenue, decrease cost of production which leads to higher profitability. It is because, after IPO,
the public limited company can offer stock or shares of company to its employees such as
employee stock option in the form of incentives or compensation. It further impacts the
productivity of employees as employee always get motivated if they get incentives from the
company for their better performance.

As stated by Chen and Zhou (2019), by getting listed on London Stock Exchange (LSE),
the company get huge coverage from the media. The impact of which the brand value of retail
sector companies increases not in the local market but also in international market. Also, the IPO
also put impact over the cost of capital of the business. It means because of IPO, the cost of
capital of business get decrease as now they able to get the loan from the bank or financial
institutions at lower interest rate. This is not possible in case of private company, because private
company need to pay higher interest on business loan. The bank and investors trust public
limited company more as compared to private company.
The Wei and Marsidi (2019), criticized that IPO is one of the biggest decision taken by
company because after IPO, all the information related to business such as financial and non-
financial reports need to be disclosed by retail sector to its users or public. If the company fails to
do so then in such case, the public will vanish the brand image of the company. In this way, it
can be said that IPO put large impact over the brand value of the company which is encourage or
discourage by the public or stakeholders only. Thus, it is important for the public limited
company that they have to fulfil the needs of its stakeholders after IPO. Also, the retail sector
need to donate the profit for the welfare of society or environment.
Theme 3: Issues faces by company that can arises after Initial Public Offering (IPO)
As per the opinion of Wang and Wang (2021), initial public offer is basically a complex,
expensive and time-consuming process which created lots of challenge and complexities to the
company after they arise IPO. One of the issues associated with IPO is compliance of legal,
financial reporting and governance. Unlike private companies, the public companies need to
share their financial statement with the Securities and Exchange Commission of UK every year.
Also, they need to disclose their financial report to public so that users can analyse it for their
decision-making purpose. As per the financial reporting framework, the public limited retail
companies also need to prepare the financial report following UK Generally Accepted
Accounting principle which is quite time consuming and complex for company.
In contrast to above statement, the Nguyen, Staer and Yang (2021), has argued that initial
public offering is expensive because of the transaction cost which is incur by the company.
Rather than recurring expenses of regulatory compliances, the IPO transaction process comes
with a huge cost such as underwriters fee, processing fee etc. Thus, after arises of IPO, retail

company of UK face this issue as one of the biggest challenge of Initial Public Offering. This
cost also includes legal fees, auditors fee, registration and printing fees which every public
company need to pay on share issue.
As stated by Leow and Lau (2020), market pressure is another challenge or issue faces by
retail companies after IPO the impact of which sometime company take wrong decision which
leads to heavy financial loss. It means once the UK retail company offer IPO or listed themselves
into London stock exchange then each move of company is scrutinized by the key stakeholders.
For example, investors have only one question from the company that will company meets its
quarterly earnings target or not. Even if the management of company are doing well in the long-
term, failing to meet the short-term goals of the public or shareholders will put the pressure on
the company that they will lose their value in the market. The impact of which they sometime
take wrong decision of investment. Thus, it is important for the retail founders to understand that
if they unable to constrained by short-term public goals then they should not think about IPO or
going public.
However, the Samarakoon and Perera (2018), has criticised the above argument that the
legal compliance is key issues faces by retail sector after arise of IPO. But actually, the loss of
control is the potential challenge faces by company after the company go public. It is because
shareholders are the one who provide money to the company so in against they always expect
from the company to act in interest of shareholders despite going in way which founder’s
dislikes. Sometime, because of the voting rights and holding control, the shareholders also
appoint new leadership in the business if they feel that company are not giving enough profit and
dividend to them.
Research Methodology
This is one of the most important section of research proposal which defines the tools and
techniques that will be used by scholar to complete and achieve research objectives. This will
cover the research method, philosophy, approach and design selected by scholar. Further, this
will also cover the ethical consideration and research limitation associated with the current study.

Research Type
Research type also known as research method state how researcher will conduct the whole
research. There are two types of research method i.e., Qualitative research method and
Quantitative research method. The qualitative method involves non-numerical data which is best
in a situation when researcher need to research or understand concept, thoughts and experiences.
While on the other hand, quantitative research method includes numerical data, facts and figures
on research topic (Shenoy and Srinivasan, 2018). In the present study, the scholar will select
qualitative research method or type because it is best suitable for understanding theory, concepts
related to research question.
Research approach
This section state plans and procedures used by the scholar in order to achieve the aims and
objectives of the study. The two types of research approach include deductive and inductive
approach. When the researcher form aim and objectives first and then complete the research
project in that direction than this is known as inductive approach. However, on the other hand,
deductive approach involves formation of hypothesis first and then identify & checking whether
hypothesis is correct or not. In the current research study, the researcher will choose inductive
approach as they have first form aims and objective along with the research questions.
Research philosophy
Research philosophy means the beliefs about the ways through which data should be
gathered, analysed and used in research. There are two types of research philosophy such as
Interpretivism and Positivism philosophy. For the current study, the scholar will use the
Interpretivism philosophy which involves human interest in both primary and secondary data
and is perfectly fit for qualitative research (Madushani, Samarakoon and Dissanayake, 2019).
While positivism is best for quantitative research which includes only factual information of
study.
Research design
This is a framework used to attain the research aims and objectives in best manner
possible. The two types of research design are descriptive and experimental out of which scholar

will select the descriptive research design for present research study. It is because descriptive is
best for gaining the in-depth knowledge of impact of initial public offerings over the
performance of company. The experimental research design involves use of scientific method to
gathered logical information of study.
Data Collection
There are basically two sources of data collection such as primary sources and secondary
sources. In the current research study, the researcher will use both primary as well as secondary
sources for data collection. It means from primary sources the scholar will get the information
using survey method via mean of questionnaire. While from the secondary sources, the scholar
will get the information from various books, journals, articles, websites etc.
Sampling
The two types of sampling involve random sampling and non-random sampling with the
help of which primary data is gathered. In the current study, the scholar will select the random
sample of 50 employees of M&S company out of the large population in order to get the
information on initial public offerings (Pandey and Pandey, 2021). The reason behind the
selection of sample out of population is that researcher do not have enough time to survey all the
employee of company.
Data analysis
This is basically one of the most significant section of RM which state the method or tools
for data analysis. For the present research, the researcher will use thematic analysis method for
analysing the data collected from primary sources. SPSS software is also one of the tool for
analysing data but it is best for the quantitative data not qualitative. Thus, the scholar will select
thematic analysis test technique to conduct the current qualitative research.
Ethical consideration
This state the ethics and values which a scholar need to follow in order to conduct and
complete the research in ethical manner. In order to do so, the present researcher will use reliable
and authorized sites only to collect the secondary data. Also, the authorised books and journals

will be used by scholar (Nayak and Singh, 2021). Along with this, the scholar will also get
approval form with signature of the respondent stating that they are not forced by the scholar.
Beside this, all the confidential information of the company will keep by the researcher in
electronic locker. The reason behind doing so is to protect the confidential information of the
company.
Research Limitation
It is important to understand that if scholar will conduct any research then they will also
face difficulty because of the various limitation of research. The various limitation of research
faces by scholar in the present research study is lack of time, resources and money. Also,
because of lack of time, the scholar is unable to select the quantitative method of research. But
then also they will manage to complete the whole project in the best manner possible with the
attainment of aims and objectives.
Timeline
Activities/ Weeks 1 2 3 4 5 6 7 8 9 10 11 12 13
Research topic
selection
Developing
research proposal
Designing
research aims and
objectives
Literature Review
Defining research
methodology

Drafting
questionnaire
Sample selection
Collection of data
Analysis of data
Concluding
findings
Recommendations
Submission to
tutor
Updating the
feedback
Final submission

CONCLUSION
After summing the above research proposal information, it is concluded that Initial Public
Offering plays vital role in the growth and expansion of business. Further, it is also concluded
that in the present time, with the help of IPO, the company able to generate large amount of fund.
The proposal has also concluded that in order to successfully achieve aims and objectives of
research project, the scholar has used qualitative method because it perfectly fits with theoretical
topic or concepts. Further, the report has concluded that, the researcher has selected both primary
and secondary data sources in order to collect the data on impact of IPO on company
performance along with what issues the company may face after IPO. This report has concluded
that all the information collected from questionnaire (survey method) is being analysed by
researcher using thematic analysis method.
In this, the outcome of questionnaire has supported by secondary sources such as books,
journals etc. Lastly, from the above report, it has also identified that Literature review section of
proposal has been done on themes basis. It means, on the basis of theme, the data on IPO from
various books, journals, articles, websites have gathered by scholar critically.

REFERENCES
Books and journals
Valarmathi, S., Jossy, C. and Babu, A., 2018. Pre IPO and Post Ipo Operating Performance
Evaluation on Indian Select Companies. Asian Journal of Management. 9(1). pp.127-132.
Espenlaub, S., Goyal, A. and Mohamed, A., 2020. The impact of shareholders and creditors
rights on IPO performance: An international study. The British Accounting Review. 52(1).
p.100872.
Giudici, G. and Bonaventura, M., 2018. The impact of M&A strategies on the operating
performance and investments of European IPO firms. Journal of Economics and
Business. 95. pp.59-74.
Li, J., 2021. TMT functional complementarity and post-IPO firm performance: Evidence from
the US biotechnology industry. Long Range Planning, p.102178.
Singh, A. K., Singhania, S. and Sardana, V., 2019. Do women on boards affect firm's financial
performance? Evidence from Indian IPO firms. Australasian Accounting, Business and
Finance Journal. 13(2). pp.53-68.
Zijiaa, J. and Zhiyu, A., 2021. Research on the Impact of Private Equity Investment
Heterogeneity on Corporate IPO Underpricing.
Zhou, L. J. and Sadeghi, M., 2019. The impact of innovation on IPO short-term performance–
Evidence from the Chinese markets. Pacific-Basin Finance Journal. 53. pp.208-235.
Chen, B. and Zhou, G., 2019. Anti-corruptions and IPO Decision: Evidence from the Chinese
provincial panel data. Available at SSRN 3632826.
Wei, F. J. and Marsidi, A., 2019. Determinants of Initial Public Offering (IPO) Underpricing in
Malaysian Stock Market. International Journal of Academic Research in Business and
Social Sciences. 9(11). pp.1183-1199.
Wang, Y. and Wang, G., 2021. IPO underpricing and long-term performance in China: the
perspective of price limit policy. Managerial Finance.
Nguyen, T., Staer, A. and Yang, J., 2021. Initial Public Offerings and Local Housing
Markets. Journal of Real Estate Research, pp.1-35.
Leow, H. W. and Lau, W. Y., 2020. Impact of founder on the IPO flipping activity during pre
and Post-Global financial crisis. Indonesian Capital Market Review, pp.69-84.
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Samarakoon, S. M. R. K. and Perera, K. L. W., 2018. Short-Run Price Performance of IPOS and
Corporate Governance Practices Evidence From A Frontier Market.
Shenoy, S. V. and Srinivasan, K., 2018. Relationship of IPO Issue Price and Listing Day Returns
with IPO Pricing Parameters. International Journal of Management Studies. 5(4). p.1.
Madushani, K. G. K., Samarakoon, S. M. R. K. and Dissanayake, A. R., 2019. Earnings
management and long-run market performance of initial public offerings: evidence from
Sri Lanka.
Pandey, P. and Pandey, M. M., 2021. Research methodology tools and techniques. Bridge
Center.
Nayak, J. K. and Singh, P., 2021. Fundamentals of research methodology problems and
prospects. SSDN Publishers & Distributors.
Basias, N. and Pollalis, Y., 2018. Quantitative and qualitative research in business & technology:
Justifying a suitable research methodology. Review of Integrative Business and
Economics Research. 7. pp.91-105.
Dodds, S. and Hess, A. C., 2020. Adapting research methodology during COVID-19: lessons for
transformative service research. Journal of Service Management.
Wang, Z. and et.al., 2019. Basic research methodology in wireless communications: The first
course for research-based graduate students. IEEE Access. 7. pp.86678-86696.
Eisenberg, P., 2019. Financial Analysis of Primark Stores Ltd. with regard to a Stock Exchange
Floatation (IPO). International Journal of Management. 7(1). pp.91-112.
Choudhary, B. and Piparo, T. L., 2020. Case Study–Strategy 2020 for M&S.
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