IPO Preparation Checklist
Many private companies view an initial public offering as a way to grow their business. This process is complicated, carries significant risks and requires a keen eye and strategic planning to ensure long-term business success.
To prepare for an IPO the first step is to create and write down your equity narrative. This will tell investors how you intend to create value, and how your business is differentiating itself in the marketplace. This is essential to establish an attractive valuation and attracting the attention of investment bankers, analysts and underwriters.
The next step is evaluating the management team and leadership. An IPO is a risky business and you must be sure your management team is able to handle it. An IPO, for example, may have tax implications and financial reporting requirements which may require the hiring of a finance or a tax expert to your executive team. It is also necessary to decide whether you want to use dual class stock, which gives founders and other senior managers different voting rights.
Having a strong record of financial accountability and control is essential for an IPO. This includes having a well-defined SOX program, which must be in place and regularly updated prior to the IPO. It is also essential to check your existing system of records. This includes capitalizations files, minutes, material agreements, and historic option grants. This is vital to meet SEC and bank underwriter requirements. It is crucial to determine if there are any potential “material weaknesses” in the company’s controls so that you can correct them prior to going public.
