Many private companies view an initial public offering as a way to increase their profits. This process is complex, carries significant risks and requires a keen eye and strategic planning to ensure long-term success.
To prepare for an IPO the first step is to create and communicate your equity narrative. This will tell investors how you intend to create value and explain how your company is differentiating itself in the marketplace. This is crucial for establishing an attractive valuation and attracting the interest of analysts, investment bankers and underwriters.
The next step is to review the leadership team and management. An IPO is a risky venture which is why you need to ensure that your management team is capable of handling it. An IPO is one example. It could have tax implications and financial reporting requirements, which could require the addition of a finance or a tax specialist to your executive team. Additionally, you will need to decide whether to have dual class stock, which grants the founders and other top managers the right to vote in a different manner.
A strong track record of financial accountability is essential for an IPO. This means having a clearly defined SOX program, which must be in place and updated before the IPO. It’s also crucial to examine your current system of records including capitalization files, material agreements and old options grants. This is essential for ensuring that you meet SEC and bank underwriter requirements. It is essential to determine if there are any potential „material weaknesses“ in the company’s controls to fix them prior to going public.