Visit our new website to find insights, case studies and more.
Visit our new website to find insights, case studies and more.
Visit our new website to find insights, case studies and more.
The better the question. The better the answer. The better the world works. У вас есть вопрос? У нас есть ответ. Решая сложные задачи бизнеса, мы улучшаем мир. У вас є запитання? У нас є відповідь. Вирішуючи складні завдання бізнесу, ми змінюємо світ на краще. Meilleure la question, meilleure la réponse. Pour un monde meilleur. 問題越好。答案越好。商業世界越美好。 问题越好。答案越好。商业世界越美好。

Phase 1 – Strategic considerations and IPO planning

Guide to going public

When weighing options and determining the best moves forward, you can chart several options and consider different paths before fully committing to one choice.

Alternatives to an IPO may include any combination of the following:

  • Sale to a strategic buyer through the M&A market
  • Sale to a private equity or venture capital firm
  • Sale to a family office
  • Private placement, often as a pre-IPO step
EY infographic, IPO strategic considerations IPO planning, phase one

The critical first step is to determine your readiness for an IPO. This is not simply about whether the market is ready for you, but more importantly, are you ready for the market?

Ask yourself:

  • Do your financials make sense and is your company’s performance consistent year after year?
  • Is the management in place and ready for the hurdles that await them?
  • Is your “story” ready to be told, and will it be embraced?

Evaluate strategic options by leveraging an IPO readiness assessment.

EY infographic, IPO strategic considerations pros and cons

Successful businesses start to prepare one to two years prior to listing.

An IPO readiness assessment or IPO readiness program management with the following scope can be helpful:

  • Strategy: Recognize the IPO location and relevant exchanges that determine the regulatory benchmarks; prepare a compelling equity story.
  • Structures: Understand the issuing company options and group structure; find out the governance and legal requirements.
  • Taxes: Prepare for tax on all levels – company, shareholder and transaction taxes.
  • Financial: Understand the issues – and any concerns - regarding external reporting, business plans, forecasting and prospectus.
  • Systems: Set out internal controls and audit, enterprise risk, compliance and IT.
  • Functions: Define the roles and processes around investor relations and compliance for before, during and after going public.
  • Leadership: Determine and modify the roles, composition and compensation of the C-suite, board of directors and HR.
  • Timeline: Determine the IPO timeline and consider regulatory approval processes, create and evaluate Plan B, and understand project management and roles.

EY’s integrated assessment and program management of IPO readiness

EY infographic, IPO strategic considerations IPO planning

There are generally four reasons for listing abroad:

  • Strategy: your company’s growth plans and vision
  • Valuation: your peers and other relevant factors
  • Preferences: the views of all stakeholders
  • Costs: liquidity, initial costs and ongoing costs

Companies can choose from more than 100 stock exchanges and listing options worldwide. Historically, approximately 10% of global IPOs go abroad.

Strategy tends to be the most important factor behind cross-border IPOs.

EY’s IPO destination compass: considerations when deciding where to list

EY infographic, IPO considerations of cost, strategy, preferences and valuation

Is there a Plan B or C? Should there be?

No one can guarantee that equity market conditions will be right once the preparation is complete.

Today, many companies prepare for a possible IPO at the same time as pursuing a trade sale, M&A or other funding. This dual- or multitrack approach allows due diligence to commence behind the scenes, and no forward movement is lost if one option eventually outweighs the other.

Choice of options, financial instruments and multitrack strategies

EY infographic of IPO single, dual or multitrack IPO strategies

Prepare at the company and shareholder levels.

Becoming a public company requires a significant shift in focus for the legal and tax structure and the finance function. It may require a move to international financial reporting standards.

As you develop your plan for the finance organization to embark on its IPO journey, you should consider the following:

  • Does your finance team have the skills required?
  • Are accounting policies and procedures documented and appropriately distributed?
  • Have formal written memos and white papers been developed to support the technical accounting policies?
  • Is the segment reporting for public disclosure aligned with your equity story and how management runs the company?
  • Have auditor independence issues been resolved?
  • Have you established audit schedules and processes to align with the IPO timeline and regulatory requirements?

Build capital market infrastructures and/or make structural adjustments to achieve IPO readiness.

You can improve your infrastructure in the following ways:

  • Improve budgeting and forecasting capabilities.
  • Put financial statements in order.
  • Prepare to comply with local securities laws.
  • Address potential IPO accounting and financial reporting issues.
  • Develop appropriate corporate, capital and management structures.
  • Document transactions with owners and management.

Extensive testing of internal control systems has become a way of life for public companies. Market leaders are working out new ways to prevent and detect fraud. They are also anticipating the risks created by ever-expanding regulation (e.g., tax or climate change) and broadening the scope of their risk management practices to include new areas, such as third-party and counterparty risk.

Ready for Phase 2?

Download the 54-page Guide to going public or call your nearest EY IPO professional to discuss your IPO plans.

Connect with EY Global IPO leaders on: Twitter LinkedIn #IPOreport

See our latest IPO insights here.