The IPO process ramps up quickly. The 12 months before a company goes public is a period of increasing complexity that requires strong execution. We offer a framework of four broad areas to help you organize high-level goals and manage the ever-accelerating swirl of demands as you prepare for your IPO.
Cultivate External Relationships
Strong connections to the sell-side, buy-side and bankers are vital. Each of the aforementioned groups plays a vital role in the interaction between the company and the market.
Start to cultivate relationships early on with sell-side analysts. Not only will the analysts have crucial insight into your peer group and be able to help inform some of your pre-IPO decisions, but partnering with strong analysts early lays the groundwork for participation in their conferences and industry events as well as potential coverage once you IPO.
Initiate conversations that “test the waters” with buy-side investors. Instead of a one-sided pitch, seek feedback from large institutional accounts in the target space. View meetings as a chance to hone the presentation and, more importantly, seek candid feedback to avoid future pitfalls.
Know your bankers. The diligence process when choosing a banking team can be arduous, but it can ultimately lead to a positive, long-term relationship. Make sure you understand the strengths of the lead bankers and their team, and do your homework when it comes to evaluating their recent IPOs in your space.
Establish a Strong Financial Foundation
Finalize audited financials. Revising historical numbers does not inspire external confidence; avoid the onerous task of regaining lost ground and redoing work.
Build financial projections and stress-test the models, ensuring that underlying assumptions are logical and quantifiable. A stable valuation is difficult if independent outsiders converge to different conclusions.
Determine guidance metrics by analyzing recent-IPOs and relevant public comps. Ideally, new companies will offer as much, or more, granularity than existing companies. Counterbalance this transparency with clarity; failing to consistently meet expectations will undermine your credibility. Utilize the relationship between you and your banking team to help establish realistic goals and metrics.
Fortify Internally
Prepare management for increased public scrutiny. To effectively navigate public markets, prepare the team to communicate the business and respond well to public inquiry. Strong internal controls, especially in the finance department, form a pathway to avoid and minimize missteps.
Designate two to four executives as liaisons to the Street. Fewer liaisons avoids inconsistency and minimizes the risk of accidentally violating securities law. Primarily, this group needs to be trained on Regulation Fair Disclosure rules (commonly called Reg FD) to avoid disclosing material non-public information.
Build a robust board. Assemble a board of relevant industry experts as well as those you can lean on for guidance and support. Board members that have experience running a public company and/or taking a company public can be valuable resources to help guide you through the process. Ultimately, a strong board can help navigate the process and translate the corporate vision into durable value.
Communicate Your Story
Clear and consistent messaging, coupled with strong internal controls, is key to attracting and retaining investors. To convey the company’s story efficiently, craft a presentation consistent with style expectations on the Street. The more clearly and concisely you present your story to investors and analysts, the faster it will “click.”
Partner with your IR team to create a myriad of different materials you may need such as pitch decks, board decks, quarterly and FY reporting updates, press releases, investor updates and one-pagers. Make sure your website is updated and features a clear and concise IR landing page that includes press releases, financial news, upcoming events, corporate governance information and investor contacts.
Conclusion
Laying the groundwork in the 12 months leading up to your IPO will set the stage for a successful public offering. Establishing relationships with analysts, investors and bankers will help inform your decisions along the way and lead to a successful public offering. Partnering with a firm such as Gilmartin Group can ease the pre-IPO process and set you on the right track as you embark on becoming a public company.
Ben Milner, Analyst
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