4 minute read 8 Aug 2018
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How to approach your IPO journey

By

Martin Steinbach

EY EMEIA IPO Leader

Over 20 years of experience in the corporate finance field: IPO, M&A, private equity, venture capital and mezzanine finance. IPO thought leader.

4 minute read 8 Aug 2018
Related topics IPO Innovation Growth

How to save time and costs – and increase your chances of success – through a structured approach to your IPO value journey.

For private companies seeking to raise capital and provide exits for their shareholders, an initial public offering (IPO) can be an attractive route and strong strategic option to funding growth – and to access deep pools of liquidity.

But an IPO is not something you should undertake lightly or as a way to raise funds for short-term needs. To make a success of an IPO means implementing change throughout the business, organization – and even rethinking your corporate culture. As a public company, you will be subject to increased filing requirements, transparency, compliance, scrutiny by investors and analysts, and overall accountability for delivering on promises.

The complexity of launching a public listing is why successful businesses start to prepare a long time before going public – in many cases with an IPO readiness assessment. Working through this process will give you the best chance to make a success of going public – and give you the confidence to be able to kick-start execution when the IPO window of opportunity opens.

How to get ready for life as a public company

Once you have decided to explore going public, you will need to map out all the necessary steps to ensure you have what it takes to win in the capital markets.

Making sure you’ve undertaken a thorough readiness assessment will help you to:

  • Save costs by having transparency on how to get IPO ready
    In an integrated approach, the assessment helps owners and managers map out what organizational changes are needed prior to a public offering.
  • Gain valuable insights into IPO leading practices
    An IPO readiness assessment helps you to decide which options are aligned with your business strategies and objectives, delivers a base case, and builds the road map for being prepared for being a public company.
  • Raise transaction certainty in unpredictable IPO markets
    The right team, story, timing and pricing are all pivotal to success. We see every IPO as transformational, so it should occur over time in a structured way that maximises transaction value; this is an important step in the life cycle of the entrepreneurial businesses we serve. Achieving readiness will provide flexibility in timing and help ensure a strong debut in the capital markets.

Typical objectives in this vital planning phase include:

  • Defining an IPO base case, which will become important information for the assessment 
  • Identifying the IPO readiness gaps and assess the efforts required to get ready 
  • Training the key people on IPO leading practices and regulatory requirements
  • Prioritizing the gaps in your IPO roadmap

To help meet these objectives, we’ve used our experience working with business owners and management teams of family businesses, scaled up and high-growth companies as well as private equity or venture capital-held companies considering their strategic options for funding for growth, including a public listing, across multiple industries.

From this experience, we’ve developed a holistic IPO readiness assessment framework – a structured approach designed to guide the company through a successful IPO transaction to a strong debut in the IPO market. If you determine that an IPO is right for you, this can also evolve into a program management framework:

Step 1: Strategy – Recognizing the IPO location and relevant exchanges that determine the regulatory benchmarks and prepare a compelling equity story

Step 2: Structures – Understanding the issuing company options and group structure and find out the governance and legal requirements

Step 3: Taxes – Preparing for tax on all levels: company, shareholder and transaction taxes

Step 4: Financial – Understand the issues – and any concerns – regarding external reporting, business plans, forecasting and prospectus

Step 5: Systems – Set out internal controls and audit, enterprise risk, compliance and IT

Step 6: Functions – Define the roles and processes around investor relations and compliance for before, during and after going public

Step 7: Leadership – Determine and modify the roles, composition and compensation of the C-suite, board of directors and HR

Step 8: Timeline – Determine the IPO timeline and consider regulatory approval processes, create and evaluate Plan B, and understand project management and roles

Making sure you’re ready to make the right move

Unpredictable IPO markets make IPO readiness and internal preparation more important than ever. While challenging markets will come and go, it’s the companies that are fully prepared that will best be able to create value and fully leverage the IPO windows of opportunity whenever they are open.

The most successful IPO candidates often spend 12-24 months – or more – building business processes and infrastructure, recruiting executive and advisory talent, getting in front of financial and reporting issues and mastering the essential board of directors’ commitment to go public.

During the journey to become a public company, an organization must prepare not only for the defining moment of the IPO ceremony – the ringing of the bell – but also for a whole new phase of corporate life after the IPO takes place.

This is why market outperformers treat the IPO as a long-term transformational process. And while our IPO readiness framework can help you make sure you’re ready, it is just one part of successful preparation and delivery of a transition to life as a public company. To help you navigate these challenges, we’ve also developed a comprehensive Guide to going public – this should ensure you’re ready to make the right moves, at the right time, to achieve lasting listed success.

Guide to Going Public

Strategic considerations before, during and post-IPO

Read more

Summary

Launching a successful IPO takes significant planning to ensure you have all the information you need, your teams are aligned, and your strategy is able to deliver against your objectives. But even when you think you’re ready to make the move, you still need to get your timing right.

About this article

By

Martin Steinbach

EY EMEIA IPO Leader

Over 20 years of experience in the corporate finance field: IPO, M&A, private equity, venture capital and mezzanine finance. IPO thought leader.

Related topics IPO Innovation Growth