An IPO is a transformational undertaking
Your company is on the rise, but you’ve taken it as far as you can go as a private entity. To reach your full potential, you know that an IPO is your next step. But is your business prepared to operate effectively as a public entity?
EY’s guide to going public is a product of our experience helping thousands of companies prepare for a public offering. It will help you:
- Evaluate the pros and cons of an IPO
- Understand the basic rules, processes and risks
- Appreciate the planning requirements
- Consider the alternatives
- Prepare for life in the public eye
Companies that have completed a successful IPO know that the preparation process is truly a metamorphosis — a series of planned, pervasive changes undertaken to achieve long-term objectives. In readying your organization for one of the most significant transactions it will ever undertake, we recommend benchmarking your progress with respect to the criteria below.
1. Prepare for the IPO journey.
When preparing for the IPO journey, it’s important to note that the IPO event is not the end game.
It is only one part of a process that will continue long after the actual transaction. Your journey begins with earnest decision-making and diligent planning. It continues with extensive internal preparedness. Readiness requires managerial diligence, endurance and clear organizational principles — the foundation of a well-run, predictable business that can scale and grow, while meeting or beating investor expectations.
2. Assemble an enterprising team.
In your quest to become a public company and achieve sustained success, you will need to harness the talented executives across your organization. This may include strengthening your management team and augmenting compensation structures to retain and motivate your most vital assets. Similarly, you will need to select a balanced complement of IPO readiness advisors, attorneys, underwriters and other key counselors who can help you efficiently and effectively navigate the IPO transformation process.
3. Strengthen your processes and infrastructure.
When you consider an IPO, you need to carefully weigh the risks, rules and regulations associated with IPO readiness and life as a public company. Before making a final decision, you’ll want to be certain that you have a comprehensive understanding of business and financial processes and technology, as well as any related potential areas of exposure.
4. Strategically assemble/augment board of directors.
Heightened public company corporate governance standards and investor demands have made assembling a board of directors more complicated. Take time to build a public company board with an appropriate mix of corporate strategists, experienced business and financial executives, and, when appropriate, compensation, compliance and governance specialists. The right board members can be selling points for the IPO.
5. Prioritize readiness over timing.
Many say that timing the market is the key to success for an IPO. We believe that market access is more often driven by investor confidence in the ability of your company’s management team to execute on your business plan and consistently deliver strong investor returns. Yes, market volatility and economic uncertainty can impact the timing, but more often than not, internal factors matter most. Your scale, growth trajectory, maturity and the readiness of your business for public scrutiny will truly drive market acceptance.
6. Get the right message out into the market.
The prospect of courting a new pipeline of public investors and maintaining aftermarket support is challenging, time-consuming and often one of the most underestimated activities in traversing the IPO landscape. Your company’s debut in the public markets requires a strategic investor relations function that communicates with your shareholders and the public and manages regulatory and legal risk, as these are critical issues to consider and address pre-IPO.
7. Target analysts and investors that can be long-term partners.
Working with Wall Street is a complex process that should be carefully addressed over time.Companies should consider a variety of disclosure and financial factors before entering these conversations and thoroughly prepare for both investor and analyst discussions as if they are speaking directly to the market.
8. Put your best foot forward through the IPO road show.
The road show is a critical event in the IPO process. Ideally, it is not the first time you will be meeting many of these investors. During this whirlwind tour, your company will be addressing key investment audiences, including the underwriters’ sales forces and prospective institutional investors. For 8 to 10 hours per day over 7 or 8 days, management must sell the investment merits of the story and be prepared to address skeptics who will challenge the investment thesis and valuation.
9. Deliver on your promises.
Once your company goes public, the real work begins: keeping the promises made during the IPO, managing the expectations of shareholders and analysts, and delivering growth and value.
Are you ready to reach the IPO summit?
Going public isn’t easy, but the rewards can be great provided you are adequately prepared, solicit experienced guidance and execute effectively.
Get ready with a readiness assessment
To determine your level of preparedness for your IPO, you may want to consider a readiness assessment. This will highlight the things you are doing right, as well as the gaps that need to be closed.
EY will be there every step of the way
As a trusted advisor to more US companies through the IPO process than any other accounting and services organization, we know what it takes to go public. And we are here for you every step of the way, from planning to readiness to execution and realization.