Spotlight on: The IPO dream team
The prospect of an IPO, though often exciting, can be daunting to any company seeking to go public. So who are the key players that will help companies get an IPO started and provide the expertise needed for success? We hear from David Myers, IPO expert at Libra Partners, who gives us an insight into the process and explains what companies can expect.
Who are the key advisers companies need to engage with for the IPO process?
Each offering is unique and will need its own specific mix of support. As a general rule of thumb, companies looking to start the IPO process will need an advisory team of one or more investment banks, a legal firm, a reporting accountant – usually the company’s auditor firm – and tax/structuring specialists.
What roles do these different advisers play within the process?
The initial steps in any potential IPO is to first determine whether the public markets would be interested in investing in the business at an interesting valuation and, second, whether the company’s governance and internal control environment is ready to make the step up to a plc.
Early engagement with the investment bank is needed to gauge investor appetite for an IPO. It will help develop the equity story, critique a company’s business plan and make comparisons with other listed peers. Crucially, if appropriate, it will also arrange early-stage meetings with investors, which provides valuable feedback.
Similarly, engaging a reporting accountant firm to produce a ‘readiness report’ as far ahead as possible will give an overall view of the internal work required to become a publicly listed company. This will include examining a range of factors, such as the board structure, financial control environment, forecast and budgeting processes and the robustness of IT.
Additionally, there are many issues the legal and tax advisers will consider in preparing the company for a go/no-go decision. For example, the contractual, regulatory and/or tax implications of an IPO for the company and its current owners.
Companies considering an IPO need to plan for the early engagement of these three key roles because the combination of their expertise really does determine whether a company has an attractive proposition that is likely to succeed.
What do companies need to remain mindful of?
The timing of engagement of these advisers is entirely unique from company to company, but firms need to strike a fine balance between early engagement and bringing advisers on board too early. Professional fees in relation to an IPO can escalate if not managed – work will expand to fill the time and, with many advisers working on an hourly fee basis, costs can soon add up.
Timing is also an important consideration. Key holiday periods, such as summer and Christmas, are generally a no-go and, as current audited financial results are a necessity, companies need to ensure that audited results are available at the time the best IPO window comes around.
Finally, the internal workload created to complete the IPO process is enormous. Gearing up the home team to cope is a must.