All systems go: Ernst & Young LLP encourages high-growth companies to 'shoot for the moon' and develop a well-constructed board to increase chances of long-term success
New York, 14 May 2013
At its annual Capital Strategies Conference: executing successful IPOs and exits, Ernst & Young LLP unveils Shoot for the moon: With the right board, the sky’s no limit, which offers founders and entrepreneurs leading practices and tips on how to build a well-rounded board to help shape the direction of a company and improve its results. The report is a series of perspectives including, Going public? Walk the walk, which provides guidance on formalizing the board structure as rapid-growth companies prepare to go public.
“Creating an informed, committed board is one of the most important things a company can do,” said Jackie Kelley, Americas IPO Leader for the global EY organization. “As a young company on a trajectory, the right board members can provide not only perspective and insightful guidance, but lend credibility to a new management team and attract potential investors.”
In a recent Global Institutional Investor survey conducted by EY, 57 percent of institutional investors reported that a critical factor for a company’s IPO success was having the right team. For those rapid-growth companies looking to go public and make a strong impression of leadership valued by investors, EY points to several recommendations for successful board make-up at different stages of growth:
- In preparing to go public, start walking the walk. Pre-IPO companies should begin to act like a public company 12-24 months ahead of an IPO.
- Acting public in advance means developing more formal structures. This includes building the board committees you need, typically including the audit committee, the compensation committee and the governance and/or nominating committee.
- In the rapid-growth stage, consider investor expertise. Investors will typically take a seat on the board as part of the financing arrangement. Consider evaluating investors for the expertise they can offer to the company.
- When a company anticipates an IPO, statutory requirements become key. The remaining investors may chose to leave the board at this phase, thereby opening seats for independent third-party directors, including those required by Securities and Exchange Commission regulations and others with experience sitting on a public company board.
As the IPO pipeline gradually increases and institutional investors are more positive about the landscape, potential investors will also be looking at who a company is able to bring on board. According to EY, it’s important to build a balanced board: on the one hand, companies want to look for luminaries and visionaries, people who have a personal brand that can be extended to help grow the company. On the other hand, companies need people with operational experience and the time to take on this job.
“Having the right people on your board is critical to a company’s chances of success,” comments Herb Engert, Americas Strategic Growth Markets Leader for the global EY organization. “A well-constructed board can give credibility to an emerging enterprise, provide needed expertise as the organization expands and offer perspective and direction to a new market leader.”
This report is the first in a series of perspectives from Shoot for the moon, which focus on topics such as board diversity, communication and recruiting. The full paper also explores why and how high-growth companies are likely to be more successful with the right board members at their side, and offers advice from successful entrepreneurs and investors, including how to build the right board, getting the board composition right, the art of director rotation and overall approaches to board communication to encourage open and honest dialogue and shared results.
To view the full report, visit http://www.ey.com/US/en/Services/Strategic-Growth-Markets/Shoot-for-the-moon.
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About EY’s Strategic Growth Markets Practice
Through our Strategic Growth Markets (SGM) practice, EY guides high-growth companies to market leadership worldwide. Our multidisciplinary teams of dedicated professionals provide perspective, advice, and insights to help our clients accelerate their growth. EY is the undisputed leader in guiding Russell 2000® companies, IPO-bound companies and Forbes’ largest private companies. We deliver assurance, advisory, tax and transaction advisory services to thousands of companies in numerous, selected industries.
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EY refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. This news release has been issued by Ernst & Young LLP, a client-serving member firm of Ernst & Young Global Limited located in the US.