Life is different as an IPO. Are you ready to face the next set of challenges?
Life as a public company
Leading a fast-growth company through an Initial Public Offering can be an intense and emotional ride. But the need for hard work doesn’t end there. Life is very different for newly listed companies.
We’ve created this guide to help you reflect on three of the key challenges that companies typically face in the post-IPO period. They are:
- Working with a larger and more diverse body of investors
- Delivering on your promises
- Maintaining the pace of growth
An IPO is a transformative step for a business. And it can change the lives of the executives involved. There are personal rewards, but also risks. How well placed are you to deal with the new challenges?
1. Working with investors
A business in private hands is probably accountable to just a few investors. But for a public company the situation changes radically. You will have hundreds, possibly thousands, of shareholders. You need to cultivate effective relationships with them. Key points to keep in mind are:
- It takes strategic planning and proactive effort to build effective relationships. The IPO process will have created excitement about your company in the media and among investors, but over time that will fade unless you maintain the market’s interest. If you don’t, the trading volume in your shares, and value of your business, are likely to decline.
- Keep refreshing and retelling your “story.” During the IPO process, you will have crafted a compelling story about where your company is going and its fast track to market leadership. You need to maintain that effort once your company is public.
- Prioritize your efforts. You need to cultivate relationships with key analysts, helping them to understand your business. Decide what mix of shareholders you want, then develop messages for your target audiences. Foster a constructive conservation about your fast-growth business.
2. Delivering on your promises
The public market is an unforgiving place. To thrive, you need to demonstrate to investors that you are successfully executing your business plan, while ensuring flawless regulatory compliance. Remember:
- Instill new levels of discipline into your organization. Market leaders have a tight focus on efficiency, improved cash ﬂow and greater liquidity after their IPO.
- Define the key metrics that will drive your business forward. Monitor these indicators closely and use them to frame public analysis of the company, ensuring that discussion of its performance takes place on your terms.
- Keep on top of emerging threats. A newly listed company has to deal with an entirely new set of risks, any of which could derail your business plan. You’ll have to master these quickly. A step-change in company-wide risk management processes, and in the way your people think about risk, may be required.
3. Maintaining the pace of growth
The preparations needed to take a business public can be arduous. With the transaction out of the way, it might be tempting to relax, but you need to keep moving forward. Your priorities should include:
- Focus on the long term. The work you put into getting the business ready for public life is invaluable, but the journey to long-term success requires rigorous planning matched by a commitment to operational excellence.
- Keep the IPO in context. The IPO may be the most important transaction in your company’s life to date, but it’s often just one more milestone along the road to market leadership. You need to continually re-evaluate, renew and recreate your business and your management team.
Your business will need to deal with these three priority issues in a climate of changing risks. Most newly listed companies need to revamp their approach to risk management.
Whatever approach you take, it should be an integral part of day-today business, monitored regularly and — where necessary — enhanced.
- Financial risks — Surprises and transparency. The market does not like surprises. Set and communicate realistic goals. Ensure your business is financially transparent.
- Strategic risks — Growth and governance. Rapid growth and organizational change create new risks and can expose weaknesses in your corporate governance.
- Operational risks — People and infrastructure. Life after an IPO can be distracting for staff. Ensure they remain focused and understand their new responsibilities. Are your systems, controls and policies still adequate?
- Compliance risks — Rules, regulations and controls. You will have to comply with a host of new rules and deadlines. Any failure to comply will alarm investors.
Becoming an exceptional enterprise
Our understanding of what makes fast-growth companies thrive tells us that the margin between success and failure is very slim: getting it right means getting your focus right.
As our Exceptional Enterprise model shows, your ability to move from “growth company” to “market leader” depends on your ability to successfully execute priority tasks in just six core business areas. They encompass the disciplines you need to master as your business completes its IPO journey and becomes a public company.