April 26, 2017
There are many pros and cons to consider when deciding to take your company public. But if you want to dramatically grow your business – and if you have a differentiated business model that you can clearly articulate to create a compelling value proposition to the investment community – there’s a chance going public is right for you.
In our experience, there are always lessons to be learned from going through the process of an initial public offering (IPO). The most successful companies take the time to prepare in advance and anticipate the many ups and downs that are likely to occur throughout the process.
These companies typically observe the following guidelines when preparing for an IPO:
1. Create a compelling case
The success of any IPO requires a clear understanding of the marketplace, market dynamics and industry peers. Defining key messages relating to investment proposition, value creation strategy and proof of performance will go a long way in creating the compelling case for investing in your company.
2. Begin to act like a public company … today
SEC and stock exchange requirements, along with the investment community’s need for detailed information, demand a higher level of transparency and accountability than most privately owned companies are accustomed to. With that comes a need for more accurate forecasting, timely reporting and a heightened sense of urgency. Your finance team should already be developing a solid base of data on revenues, volumes, pricing, customers and business line performance that you will be required to disclose as a public company.
3. Prepare your management team
Make sure the members of your management team understand their fiduciary and public disclosure duties. Establishing a thorough disclosure policy that identifies the executives authorized to speak on behalf of the company will be critical to your compliance and risk management efforts. Ideally, members of management should go through disclosure and media training several months prior to going public.
4. Develop a robust communications strategy
Creating and implementing a robust communications strategy well in advance of going public will help familiarize and validate your strategies and successes for key stakeholders. It will also set a cadence for communications after the company goes public, with clearly defined timing for earnings announcements, quiet periods, annual meetings and more.
5. Listen to what analysts and investors are saying
Long before your stock begins trading, you will be the focus of dialogue among analysts, investors and market influencers. It’s important to keep in mind that they are likely to be speaking with your peers, customers and suppliers in an effort to understand market trends and interpret the impact of financial results and company events.
6. Leverage the media
A well-planned financial media relations strategy will help ensure an optimal market valuation when you go public and afterwards. The media remain a powerful source of investment ideas for buy- and sell-side analysts. Become familiar with news outlets that influence your target investors so that you can establish a working dialogue with the appropriate reporters and editors long before the offering is launched.
7. Have a digital IR strategy
Investors rely heavily upon company websites, mobile devices and technology applications when they research new investments and monitor the performance of their portfolio companies. Making sure you provide the information investors need, not only when they need but also the way they want to receive it, will be important to building strong relationships with the investment community.
8. Line up your “A” Team
A transaction of this size and impact requires an experienced team that typically consists of internal and external advisers including board members, executives, legal counsel, and financial and communication experts. External auditor competency and responsiveness will be critical as you prepare to go public, and even more so afterwards.
The completion of an IPO is a major accomplishment for any company and one to be proud of. Yet, being publicly owned comes with unique burdens. The earlier you prepare for them, the more effective you will be in communicating with investors over the long term. If you want to discuss this further, email me or call 216-241-4606.