‘Timing the market' is a key success factor for an IPO. However, timing the market is far more than just watching and waiting. To take advantage of the window of opportunity when it comes along, your company needs to be behaving and operating like a public company. Perhaps it is a once-in-a-lifetime event for many corporates, an IPO is not a single event, but a transformational journey that can change the fortunes of its investors, owners and employees. Without smart planning and preparation, an IPO can be doomed from the start.
Building the right team to take a company public is one of the crucial steps to becoming a public company. Once the company begins, the time and effort involved in execution of IPO plans could have an overwhelming impact on existing resources that are trying to operate the business along with the IPO plans. The team should have a fair balance between the key internal stakeholders and experienced external advisors who can integrate into the corporate culture of the company and become part of the team for a successful IPO. Their advice, experience and expertise will supplement the management team and provide support in areas such as corporate governance, internal control structuring, tax structuring, investor-relations and preparation of the offer document.
The team
A steering committee is required to ensure that strategic and structural decisions are taken in a timely manner. This is key for transformation. These committees are usually led by the Chief Executive Officer and supported by other key process owners like CFO, CTO,CLO and external advisors. Once the company goes public, the CEO and CFO will devote a significant amount of time to investor relations and communications. It is, therefore, paramount that, they have an executive team — that is well equipped to oversee the day-to-day operations of the company. Strong IPO performers will typically begin the process of building their team much in advance of the planned timing schedule to ensure that team is embedded and working well together long before the IPO.
Being a public company will also require a legal, financial, technological and risk management infrastructure which can support the additional demands of life as a listed company. With the changes in financial reporting and related compliances across the world, advance study and understanding of nuances in reporting standards becomes necessary. Financial reporting takes on an increased level of importance and greater transparency as a public corporation. Ensuring that financial information presented is not only compliant with the relevant and most widely accepted GAAP for the company's investors but also with the regulatory requirements, serves as a marketing tool to support the growth story of the business is a difficult balance to strike.
Financial statements
Post-IPO, annual and quarterly financial information will need to be filed on a continuing basis. The financial statement close timeline will often need to be significantly reduced to enable increased analysis by internal management and adequate communication with the board, shareholders, investors, analysts and other stakeholders prior to the regulatory filings taking place. A dry-run of the financial statements for a number of quarters prior to going public will ensure that the new processes can deliver the information in the timescales required.
The effort required to upgrade the relevant processes and systems to support the additional reporting requirements should not be underestimated. It will be necessary to assess whether the current IT systems and processes will be capable of capturing, organising and analysing all the business information which will be required internally and externally, quickly and easily. Systems will also need to be sufficiently flexible and adaptable to grow with the needs of the business.
An IPO is a transformational process for all companies that embark on this journey and the focus ought to be on being public rather than just going public. Investment in preparation will lead to both a successful IPO and support long-term success as a public company.
(The author is Partner in member firm of Ernst & Young Global.)