The decision to take a company public may be difficult for some leadership teams, but for many others, it is often the logical next step for a private enterprise. Regardless of whether it was an easy decision or one that entailed months of discussions, there is no doubt that the actions required to initiate the process are rather onerous. Here are some tips to facilitate the transition:
Preparation is by far the most important component to ensuring a successful initial public offering (IPO). Although it is certainly possible to pull the trigger and jump into the process straightaway, it is generally recommended that companies begin their preparations months, even years in advance.
In addition to having a range of factors to take into consideration, private companies that have been around for awhile may need to make actual organizational and financial changes prior to the public launch. Any changes to the organizational structure or financial portfolio may take time, and it is unwise to address such matters in a hasty fashion. Therefore, the best course of action involves diligent and meticulous preparation.
One way to streamline this process is to establish a virtual data room for all IPO-related materials. Companies can utilize an online data storage service to create an online repository to stockpile all pertinent information prior to the offering. This centralizes important data and makes it a lot easier to share data with internal and external parties. Plus, with the right solution, meaning one devoted to ensuring data security, confidential items will remain confidential.
One of the surefire ways to generate interest in a company is to demonstrate its value and growth potential. And, this cannot rest on mere assertions or empty promises. Potential partners and investors want to see concrete data. As a result, companies must carefully craft solid financial statements, and these statements should be scrutinized by at least one independent auditor, if not more.
Also, the company budget must be scrupulously prepared and maintained, and financial performance must be routinely monitored and updated, meaning up until the very day of the offering. It is imperative for companies to ensure that these calculations and projections are accurate, and any accounting or other calculation methods must be transparent.
These financial documents can also be uploaded to and safely stored in the virtual data room to become a part of the IPO portfolio.
Most company leaders probably groan at the idea of going through an audit, but when it comes to going public, this is something that must be done beforehand to allow time to rectify any issues. Obviously, this entails auditing financials as mentioned above, but companies should also audit other aspects of the business.
For example, companies should analyze their operational capacity and efficiency, staffing and management, and compliance with local, state, and federal laws, among other facets of the business. This may entail a formal process involving an outside agency or the establishment of an internal task force. Irrespective of how it is conducted, all findings should be documented in some fashion, such as an internal memo, and added to the virtual data room.
Some companies may wait until they have made the right business connections before deciding to go public. Others make the decision and subsequently seek out key connections. Either way, it will be necessary to share information with relevant parties, including investment banks, private investors, advisors, auditors, and law firms, among others.
Preparing the requisite documentation and organizing it in an online data room will foster these relationships, as it will demonstrate professionalism and diligence. It will also facilitate the sharing of information among the various parties and enable a company to keep tabs on what is shared and with whom.
Prepare Some More
Even though we began by emphasizing the importance of preparation, we cannot help but reiterate this key point. There is no way to over-prepare for an IPO, and most IPOs encounter a few hiccoughs despite the most rigorous preparation.