The Ins and Outs of Preparing for an IPO: Phase two (A)

This is the fourth in a series of posts: The Ins and Outs of Preparing for an IPO -What Your Company Needs to Know. 

Phase II – Executing an IPO

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As we discussed in the previous blogs, once the pre-IPO assessment has been completed, identify company should have a clearer idea of some of the challenges it will face, and can shape the steps needed to make the conceptual plan a reality.

Similar to the preparation phase, the time needed to implement these goals should not be underestimated. There can be several months of work needed before the formal IPO launch. This phase can range from one to 12 months, and will require company executives maintain a strong focus on change management approaches, as well as an appreciation of what can reasonably be accomplished within the given time frame.

Building the management team

To convince the investment community that it has the skills and experience needed to undertake an IPO transaction, a company must expand its management capabilities. Investors often say they back the people, not the plan. For the majority of institutional investors, quality of management is the single most important nonfinancial factor when evaluating a new offering.

Most companies seek top management officials with a proven track record in IPOs. In addition, both the executive team and management must demonstrate the capabilities to oversee daily operations. Some companies will turn to individuals who have public company experience in marketing, operations, development and finance.

The CEO is generally focused on investor relations in a public company. The investment community will look to the CEO to articulate and execute the company’s vision. According to PwC, “Many companies also want to put a CFO in place who has previously been through the IPO process.” Meanwhile, according to EY, “Although both the CEO and CFO will need to co-navigate the pre-IPO process, the CEO often becomes the primary liaison with the aftermarket.”

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A key factor to consider when assembling a management team is remuneration and incentives. Remuneration is an area of increasing complexity and an ongoing regulatory challenge. As EY points out, “An IPO presents significant opportunities to deliver remuneration in ways that are not generally available to private companies. Equity can form a key component of remuneration for executives, and can be used to promote the company’s brand among employees.”

Download our S-1 registration workflow chart for a visual understanding of the SEC commenting period.

CLICK HERE to download our S-1 registration workflow chart for a visual understanding of the SEC commenting period.

As market leaders look at innovative ways to recruit and reward their key senior talent with incentives, those incentives may include performance-based compensation structures, share options, greater transparency and employee involvement. High-level incentives and shared ownership by management create the motivation that often leads to strong performance.

The process of assembling an external advisory team should begin well in advance of the IPO launch date. It is generally made up of an array of professionals from fields as diverse as investment banking, legal, public relations, marketing and accounting. The external advisory team should have experience with the IPO process, an existing network of contacts and knowledge of the company’s industry. It’s also critical that the team shares similar long-term goals for the company.


PHASE THREE, PART B WILL BE POSTED NEXT WEEK

 

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