When the IPO window of opportunity opens, winning companies are ready.
For fast-growing private companies seeking to raise capital, an IPO can be a superior route to funding growth.
An IPO is the first sale of a company's shares to the public and the listing of the shares on a stock exchange. It allows a company to raise capital to build its business by creating and selling new shares.
Not all businesses are suited to life in the public eye. But for many fast-growing private companies, an IPO can raise the capital they need to accelerate growth and achieve market leadership.
Find out about the secrets of companies with highly successful IPOs:
- Begin the IPO readiness process early enough so that your pre-listed company acts and operates like a public company at least a year before the IPO
- Commit substantial resources to the IPO process and build the quality management team, robust financial and business infrastructure, corporate governance and investor relations strategy that will attract the right investors
- Properly assess the amount of time the IPO journey will take, or the level of scrutiny and accountability faced by a public company
Outperform competitors on key benchmarks
- Investors base an average of 60% of their IPO investment decisions on financial factors especially: debt to equity ratios, EPS growth, sales growth, ROE, profitability and EBITDA growth
- Investors base an average of 40% of their IPO investment decisions on non-financial factors especially: quality of management, corporate strategy and execution, brand strength and operational effectiveness, and corporate governance
- Articulate a compelling equity story backed up by a strong track record of growth which sets you apart from your peers while maximizing value for owners
A useful alternative
The "Locked Box" mechanism, an alternative to the deal completion phase, can speed up and simplify deal completion by:
- Providing greater certainty over the price that needs to be paid for a target business on completion, which for the seller frees up capital for reinvestment.
- Removing the need for a post-completion "true-up" process.
Evaluate capital-raising options
- Consider a "multi-track approach" and the expanding number of capital-raising strategies — including a strategic sale to a trade or financial buyer, joint venture, private placement or a foreign listing
- Pursue pre-IPO transactions to achieve maximum value — especially debt financing and refinancing, corporate reorganization, private placements or business alliances
Address investors' current concerns
- Recognize the need for enhanced corporate governance — especially recruiting qualified non-executive board members, improved internal controls, and forming a qualified audit committee
- Fine-tune your internal business operations — especially working capital management, regulatory risk and rationalizing the business structure
- Deal with current accounting challenges — especially asset valuation impairment, consolidated subsidiary financial statement issues and revenue recognition
IPO value journey
The IPO process should be a structured and managed transformation of the people, processes and culture of an organization. We refer to this process as the IPO value journey.
Although the IPO event itself generally lasts 90 to 120 days, the value journey begins at least a year or two before the IPO and continues well beyond it.
While an IPO should be a key turning point in the life of your company, market leaders don't treat an IPO as simply a one-time financial transaction. They recognize the IPO event itself as just one defining milestone in a complex transformation from a private to a public company.
We explore the specific steps of the IPO value journey across the following phases: