3 minute read 5 Aug 2021
Getting ready for IPO

Planning your IPO journey? Here’s how to best approach public listing

By Sandip Khetan

EY India Financial Accounting Advisory Services Leader

Keynote speaker. Seasoned accountant. Experienced GAAP consultant.

Contributors
3 minute read 5 Aug 2021

Our research helps identify critical IPO success factors which can help transform a private entity into a listed company.

Initiating an IPO can have a profound impact on an organization and requires a significant shift in focus. Businesses should treat your IPO as a defining milestone in a complex transformation from a private to a public company, and not as an event. It should have:

  • A holistic and structured approach
  • A managed transformation of people, processes, systems and culture of an organization
  • A process that starts long before the transaction

Thorough preparation is necessary for a smooth process. This is especially true for the finance organization, which requires the experience, depth and agility to address the demands and scrutiny of public markets. Furthermore, the finance organization must be appropriately aligned with other critical functional areas, including internal audit, investor relations, legal, IT and human resources.

Preparing for an IPO?

IPO Journey

On the journey of transformation into a public company, success depends a great deal on a coordinated team effort by the internal management and the advisory team. Following economic uncertainty, it is more important than ever to build a quality IPO advisory team.

The IPO value journey

IPO Value journey

Key considerations: Here is what companies with highly successful IPOs/capital raising agenda do

  • Prepare early

    • On the journey of transformation into a public company, success depends a great deal on a coordinated team effort
    • by the internal management and the advisory team. Following economic uncertainty, it is more important than ever to
    • build a quality advisory team. Begin to assemble your advisory team well in advance of your public launch.
  • Attract private equity/private equity exits

    • Compare the different exit options and the viability/advantages of multi-tracking
    • Identify the most profitable structuring options
    • Identify value-enhancement opportunities (and the associated time/value choices)
    • Consider the financial information requirements for the different options and identify where gaps need to be filled
    • Consider the robustness of the value story and support it with current initiatives
    • In a carve out or demerger situation, identify standalone earnings and parent company impact as well as the timing and costs to achieve
  • Outperform competitors on key benchmarks

    • Focus on the financial factors that investors pay significant emphasis on, especially debt to equity ratio, earning per share (EPS) growth, sales growth, return on equity (ROE), profitability and earnings before interest, tax depreciation and amortization (EBITDA) growth
    • Other non-financial factors, including quality of management, corporate strategy and execution, brand strength and operational effectiveness, and corporate governance, are also scrutinized by the investors
    • Be able to articulate a compelling equity story backed up by a strong track record of growth that sets you apart from your peers while maximizing value for owners
  • Evaluate capital raising option

    • Start early with a holistic discussion about the strategic options offered by IPO and M&A markets and consider an array of exit and funding alternatives in an IPO readiness assessment.
    • Pursue pre-IPO transactions to achieve maximum value — especially debt financial and refinancing corporate-organization, private placements or business alliances
  • Address investors’ current concerns

    • Recognize the need for enhanced corporate governance, especially recruiting qualified non-executive board members, improving 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
    • An entity should also consider the regulatory requirements of the local stock exchange before filing for an IPO, as discussed subsequently

Companies need to consider regulatory framework and compliance to be met while going for an IPO.

For fast-growing private companies seeking to raise capital, an initial public offering (IPO) can propel their growth. While the market looks promising, companies that are fully prepared will be best able to leverage the window of the current IPO opportunity. For over two decades, EY has worked with top companies considering their options for funding for growth, including a public listing. We also frequently undertake extensive research to identify critical IPO success factors.

Summary

The strategy and goals associated with an IPO process marks a turning point in the life of a company – you need to be ready. The rewards can be monumental. The keys are proper preparation, experienced guidance and effective execution.

About this article

By Sandip Khetan

EY India Financial Accounting Advisory Services Leader

Keynote speaker. Seasoned accountant. Experienced GAAP consultant.

Contributors