Many private companies see an initial public offering as a means to grow their business. This process is complicated and comes with significant risks. It requires strategic thinking and careful plan-of-action to ensure long-term success.
In order to prepare for an IPO the first step is to write and present your equity story. This will communicate to investors how you plan to generate value and how your business is differentiating itself in the marketplace. This is crucial for establishing an attractive valuation and attracting the attention of investment bankers, underwriters and analysts.
The next step is to evaluate the management team and leadership. An IPO is a high-risk venture, so you want to ensure that your management team is capable of handling it. An IPO, for example, could come with tax implications and financial reporting requirements which may require the hiring of a finance or a tax specialist to your executive team. Additionally, you will need to decide if you want to use dual-class stock, that gives the founders and the senior managers different voting rights.
Having a strong record of financial accountability and control is crucial for an IPO. This includes having a well-defined SOX program, which must be in place and up-to-date prior to the IPO. It is also important to review your current system of records. This includes capitalizations files, minutes and material agreements as well as historical option grants. This is crucial for meeting SEC requirements and bank underwriters. You must determine if the company has any «material weaknesses» to improve them prior to going public.
