A well-conceived initial public offering (IPO) road map helps guarantee a company’s smooth transition into the public-market with minimal disruption to its operations.
Early planning can also help mitigate the additional burdens placed on public companies, such as the numerous regulatory and reporting requirements.
The author of this paper cautions that the IPO process is time consuming, complex, and requires a company to have a clear and complete understanding of its core business functions before embarking.
At the center of an effective pre-IPO plan is a complete understanding of an entity’s legal, regulatory, financial, and operational requirements once in the public-market, and the associated steps and processes necessary to meet those requirements.
Ideally, a readiness assessment should take place at least nine months to one year prior to going public.
A company’s management team should review the existing corporate structure with an emphasis on tax planning.
How the entity will communicate with its investors, the financial community, and Wall Street analysts should also be addressed.
Assembling an IPO-readiness team of individuals with unique expertise is critical. This includes underwriters with specific industry knowledge and a track record of keeping commitments. It also includes accountants with a depth of technical resources to address SEC review, among others.
This article provides a detailed outline of the best practices to be implemented as part of IPO-readiness including reorganizing and memorializing related-party arrangements, putting employment agreements and equity-oriented arrangements in place, subjecting current financial statements to the public company review process, and regularly preparing management’s discussion & analysis (MD&As), among other key steps.
Once public, an entity’s corporate governance often emerges as a key issue in need of addressing.
The author encourages companies to evaluate whether their existing board is capable to handle issues that will arise once publicly-traded and to close any gaps in expertise that are identified.
An effective corporate governance structure needs to be in place to increase transparency and manage shareholder expectations.
Market conditions, domestic and abroad, can swiftly change and dramatically affect even the most well-prepared companies as they transition to the public markets; however, companies that thoroughly prepare for their IPO will be better equipped to navigate trouble.