Bookrunner

In which types of transactions does a Bookrunner operate?

The term Bookrunner is primarily used in capital markets transactions, whether in:

Debt capital markets (DCM), such as bond issuances;
Equity capital markets (ECM), including Initial Public Offerings (IPOs), capital increases, convertible bond issuances.

When an issuer (e.g., a corporation) wishes to raise funds, it turns to one or more banks that:

structure the transaction;
place the securities (shares or bonds) with investors;
may underwrite the successful completion of the operation.

If several banks are involved, they form a syndicate, within which each member has a specific role — including that of Bookrunner.

What is the role of the Bookrunner?

The Bookrunner is one of the banks responsible for the placement of the securities issued.

1. Marketing the transaction and collecting orders
Sales teams from the Bookrunner:

contact investors;
present the investment case;
collect purchase orders (requested amounts and maximum acceptable price).

2. Centralizing all orders and managing the order book

The Bookrunner:

aggregates all investor orders, including those collected by the other syndicate bank;
analyses demand quality and depth;
builds the order book.

The placement period may last:

a few hours for a bond issuance,
several weeks for an IPO.

3. Advising the issuer on final pricing

At the end of the placement, the Bookrunner advises the issuer in determining the final issue price, based on:

overall investor demand;
book composition;
market conditions;
desired investor profile.

Investors who bid below the final price are not allocated any securities.

4. Allocating securities to investors

The Bookrunner is responsible for the final allocation of securities, considering the size of each order, the strategic importance and quality of each investor (e.g., long only, institutionals, trading oriented).
The issuer’s objective is to guarantee a stable and balanced investor base, depending on the nature of the operation.

What are the types of Bookrunners?

Active Bookrunner

An Active Bookrunner plays a leading and influential role in the transaction:

maintains and manages the physical order book;
plays a decisive role in setting the final price;
is heavily involved in the allocation of securities to investors.

Joint Bookrunners (Co bookrunners)

These are appointed when several Bookrunners share the role on a single transaction.
Bookrunners other than the Active Bookrunner, while more passive, still benefit from the prestige and visibility associated with the title — particularly in league tables (bank rankings by type of transaction).