Ready for the IPO Spotlight?
Strategies for going public
The market for initial public offerings (IPOs) can be volatile. Favorable conditions for going public can vanish as quickly as they arise. Careful planning is critical. The plan must consider the tasks and the timing of the tasks required to go public and operate in public. The company must be prepared to perform in the glare of the public spotlight.
It takes careful, comprehensive pre-IPO planning. Executives may underestimate the pressures of managing to quarterly performance expectations, and the effort required to establish and maintain governance and risk management practices along with management-board relationships. The IPO team must integrate senior executives with the auditors, accounting advisors, tax specialists, attorneys, underwriters, and public relations professionals needed to advise them.
One mistake is to take a piecemeal approach rather than considering the comprehensive needs of the business in this area. A good business case and the preparation that goes into it provide a strong foundation for managing the company well once it has gone public. In addition, a company that presents well to investment bankers and analysts is better positioned for a higher valuation.
To avoid confusion, chaos, and unnecessary costs:
- Consider the ways in which going public will affect every area of the company. Also understand what you can communicate about going public and when you can — and can't — communicate it.
- Analyze required public company capabilities and identify gaps between current and required capabilities, and the resources needed to close the critical gaps.
- Access expertise you will need beyond the legal and investment banking areas to develop the needed accounting, auditing, tax, governance, and risk management capabilities.
- Position the company to go public well in advance, so you can issue the offering at an advantageous time rather than rushing to hit the market when it's hot — and risk missing it.
- Adopt certain public company practices beforehand to reduce pressure and the unpleasant surprises and costs that pressure creates.
Given the number of tasks and technicalities involved, planning should begin at least a year before the planned IPO — and preferably earlier. If you are even considering taking your company public, or playing a role in an initial public offering, consider the impact on all areas of the company to create the competence, confidence, and performance that maximize the value of the IPO.