IPOs Are On the Rise
3 Often-Overlooked Keys to Making Your IPO a Success
PitchBook has published their 2Q2014 Global Look at PE Investing. Most of the news if good, and one particular finding is just spectacular — private equity IPO exits are the best they have been since 2006. IPOs across the board appear to be on the rise, and more and more private equity and private owners alike may choose this path for liquidity events going forward.
As anyone who has been through an IPO knows, they are not a sure thing and a lot can go wrong. Ed Sweeney, Managing Director at Pine Hill Group, has helped dozens of companies go public and says, “Many company executives that go through the IPO process list accounting and compliance as their major challenges.” The good news, however, is that there are three often-overlooked things keys to IPO success that can that can ease those challenges and help make your IPO a success:
- Have bullet-proof financial statements and filing documents. Spreadsheets and paperwork are hardly things that are top of mind for most companies as they prepare for that dramatic grab for the brass ring. However, the company and market excitement around an IPO can disappear in the blink of an eye when technical errors, insufficiently validated numbers, or administrative errors in filing paperwork get in the way. Many pre-IPO companies simply don’t have the resources or experience for the immense blocking and tackling effort leading up to the public filing. A little expertise can go a long way to getting it done right the first time.
- Be ready to operate like a public company before actually going public. In the heady rush towards the public filing, many companies don’t focus on the significant operational, compliance, and reporting changes that will be necessary once they go public. While The Jumpstart Our Business Startups Act (JOBS Act) is designed to make it easier for smaller companies to raise equity in the capital markets, significant efforts still are required to maintain compliance with regulatory standards and investor expectations after going public. Addressing these up front can not only help companies avoid unpleasant surprises after the IPO, but also increase the company’s credibility with analysts and potential institutional investors during the run-up to the big day. Even an initial analysis of the operations, compliance, and regulatory gaps and a plan to bridge them can raise a company’s profile.
- Demonstrate readiness to employ newly-sourced public capital effectively. Pre-IPO companies often focus their efforts on developing and merchandising their grand strategies for how they will grow and provide excellent returns to their investors, but fall flat when their ability to actually implement those grand strategies come under scrutiny. Every aspect of a company’s operations, including their information systems, need to demonstrated as ready (or a plan evidenced as to how they will be made ready) to support that hockey-stick CAGR or the integration of planned acquisitions. That readiness, and all of the details, can be a compelling part of the company’s pitch to analysts and potential institutional investors in the days and weeks leading up to the main event.
For more information about how to make your company’s IPO one for the history books, please visit www.thepinehillgroup.com.