This article was previously published in the Financial Post, Tuesday, Oct. 12, 2010
In this, the second of a three-part series in FP Executive, Salma Salman explores the heart of the IPO process—planning and execution.
After having gone through a comprehensive process, a decision has been reached to transform your private company into a publicly listed enterprise. Now the real journey begins.
The next two stages—preparing to go public and then executing the initial public offering (IPO)—will require meticulous adherence to carefully crafted and detailed steps.
- The first step in the preparation process will require you and
your staff to perform a thorough review and strategic assessment to
best position your company for its IPO, which includes such factors
as:
- Checking and, if necessary, refining your financial plans to ensure they are realistic and credible to potential investors and other external stakeholders. A key change during this new phase of your corporate life is that you will have to pay close attention to public image and perception.
- Ensuring your company's infrastructure is strong. Do you have, for example, business information systems that provide relevant and timely data to meet the demands of public reporting, compensation plans that are competitive and appropriate for retaining top personnel, and upto- date capital assets that remain productive?
- Making certain that your firm has a strong governance system
appropriate to a public company, including a board of directors
capable of providing an experienced, independent perspective, and
is capable of assuming an enhanced stewardship role to service a
much more diversified investor base when your firm becomes a public
company.
- The second step involves deciding on the appropriate corporate
and management structure, which should be fl exible enough to adapt
to the fl uid, often changing needs of a growing company dealing
with legal and regulatory matters, and contend with a large group
of shareholders.
The structure will take into account such factors as the most efficient taxation regime, which may be very different from a private company. Expert advice from various sources, including management; the board of directors; and external advisors, such as tax accountants, auditors, lawyers, underwriters, valuation specialists, and appraisers, will be required before finalizing such decisions. - Step three involves assembling the internal and external
members of the team that will lead your firm through its IPO
planning and execution process, while also ensuring the
business's daily activities aren't neglected during this
transition.
Many of the same professionals that help you decide on the optimal corporate and management structure as a public entity will also be members of this team. One of the most important decisions is selecting an underwriter, not just to market the offering as an IPO, but, more importantly, to provide the aftermarket support that will be critical to your success in your early days as a public company. - Fourth, you should develop a project management time-line and framework designed to bring the IPO to fruition—from preparing the preliminary prospectus to finalizing documents—including establishing benchmarks with which to monitor progress.
- The final step associated with the preparation phase involves
deciding on the offering structure itself and developing the IPO
offering, which involves making preliminary decisions about factors
such as the optimal quantity, type and price of securities to be
listed, as well as the exchanges where the securities will be
traded.
The execution stage involves a lot of intense activity over a short period of time.
The main step is preparing the preliminary prospectus. It presents potential investors with detailed financial, business and all other material information about your company and must be certified to contain full, true and plain disclosure of all material facts. Independent underwriters must then undertake a due diligence report on your company and after that a regulatory review will take place where deficiencies may be discovered and that will need to be addressed.
During the execution phase, you will also—in consultation with your underwriters—finalize the pricing and number of shares to be issued, update and finalize your prospectus to refl ect this information and also, working with your underwriters, step up your corporate marketing efforts with comprehensive presentations about the company to institutional investors and investment dealers. - The final step involves closing the IPO and having your company's shares commence trading on your chosen stock exchange. A brand new phase in your corporate history lies ahead.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
