The decision to go IPO is one of the most exciting milestones in a company’s journey—and the start of an incredibly busy and challenging time. While the decision tends to center on the big event, the work leading up to the initial public offering and afterward is enormous and can strain an already busy team. For CFOs and other senior executives who need to lead their company through their initial public offering, here is a guide to going public.
A CFO Guide to IPOs: Don’t Underestimate the Work Involved
Going IPO is complex and expensive—and time consuming. The prep work leading up to the IPO could take as long as two years. Smart companies build their infrastructure well in advance to be ready for the moment. Then there’s the constant scrutiny that becomes a way of life once the S-1 gets in the hands of analysts, investors and competitors.
You’ll need to be ready for the possibility that regulators will have a lot of questions, in addition to inquiries from savvy investors. Making the wrong move at any point could hurt the company’s growth potential and lead to employee burnout, just when you need your most valued performers the most. You’ll want to cover your bases before finalizing the decision to go public:
Make sure you’re doing it for the right reasons: Personal wealth buildup and boosts to the ego are side benefits to a successful IPO—but the focus should be on raising capital to fund the company’s growth plans.
Consider the alternatives: To explore whether going public makes the most sense for the business at this time, also weigh the pros and cons of other exit strategies, such as a merger or acquisition, strategic alliance, or private equity funding.
Picture the changes ahead: The company as you know it is going to change, as it moves from an organization run by just a few people to a company owned by anyone who wants to buy a piece. Investors will have a right to some decision-making power, and management will no longer have all the control.
Preparing for Your IPO
Is your company IPO ready? Smart companies that have an IPO in their sights get their financial house in order early on. But you’ll need more than audited financial statements and an S-1 filing to be “ready.” Here are few of the many other steps you’ll need to cover:
- Know your story: Consistency matters, from the prospectus to the words on your website to the narratives told by senior leaders as they promote the company at roadshows. Anticipate questions and have potential answers ready. How the company describes its talent, product roadmap, geographic expansion and goals, can highly influence share price.
- Act like the company is already public: By operating like a public company, as early as a year before the IPO, you can make improvements along the way, such as upgrading outdated systems, wiping out manual processes and overcoming the learning curve of SEC requirements.
- Develop a SOX timeline: You’ll have until the second 10-K to submit your first Sarbanes-Oxley compliance report, but you’ll need a well-designed system of internal controls that will help prevent material misstatements to financial statements well before that time.
Managing Your Company Through the Post-IPO Transition
A culture shock is inevitable as the company takes on a more disciplined way of operating. Decision-making will be centered around short-term needs and results, rather than the long term. Employees need to be kept informed about the company’s direction in addition to the new expectations on behavior as they’ll have to follow to comply with insider trading rules and restrictions.
Decide how much of your old culture to retain, figure out how to manage the new one, and evaluate the staff to take note of any skill gaps. You’ll need people who are open-minded and willing to switch to new systems and processes, while being able to meet stricter deadlines and shorter turnaround times.
RoseRyan as Your IPO Guide
As you can tell from this IPO guide, operating as a public company is like living in a whole other world. You need people who have taken companies through the entire IPO process who can help you make sense of it, and thrive in it. They’ll guide you through the before and after of the IPO, by keeping you informed about what to expect, preparing the company for this new world, and getting it through the rocky transitional period. And they’ll fill in the skills gaps and situate your staff with the new way of working. (We’ve also served as a US IPO guide for companies based outside the country that want to list here.)
With tight financial accounting and reporting, and a robust system with efficient, practical processes, the company will be set up for a maximum valuation and its new class of investors. Learn all about RoseRyan’s Transaction Advisory Services and how we can manage your IPO process from start to finish.