What Companies Need To Do Before Preparing For An IPO

Going public may for some appear to be as simple as snapping your fingers and – presto! – your company has a stock symbol and listing on a leading stock exchange, ready to be snapped up by a horde of financial investors eager to find the next big thing.

But while that end result (and a much-desired result at that) does in fact occur, getting to the stage isn’t a one-step process. Rather, it’s a multi-stage process that requires companies to do some clear thinking and thorough planning before beginning the process of preparing for an initial public offering (or IPO).

There are five key steps in the preparation process. Let’s go through them.

Putting your Company through an Exhaustive Review

Put yourself in the shoes of an investor. Now imagine, what exactly are you looking for, generally speaking, in a company that you would consider putting your money into? Odds are, you’re looking for an organized and efficiently run business that knows itself through and through, from its operations to its financing to its management. Making sure your company is well and ready will not only signal to investors that you’re offering up an attractive investment, but also provide a clear indication of just how your business operates – or, to put it much more bluntly, just how well it “does business.” This all translates into investor confidence – an important consideration that can help determine the value of a company’s share price.

So, coming at it from the position of a firm that is gearing up to go public, it’s best to subject your firm to a wide-ranging review touching on its current operations and capabilities.

What Companies Need To Do Before Preparing For An IPO

Fine-tune and Make Decisions About Structure

Take a cold, hard look at the current corporate and capital structure of your company – and do this with the helpful advice of a leading team of IPO advisors. You’re looking for structures that are both simple and straightforward but also flexible. Ideally, they’ll be easily adaptable as the public company’s needs and requirements go through changes over time. It’s also a good idea to review management – the structure of management along with roles, responsibilities, reporting structures and authorities, or who is in charge of what – and also do some research to figure out if the market is ready to successfully receive and embrace your company’s IPO (something outside experts can lend an important hand in).

Put together the Right Teams

Consider going public the biggest decision your company will ever make – because in nearly all cases it will be. So, then, what do you need to make sure the process of making that decision – and hitting a public stock exchange with an IPO bang instead of a whimper? – goes well? Expertise. Don’t think that going public is something a company can steer itself through alone. You can’t; it’s an exhaustive process that needs no small degree of specialized knowledge, skills and expertise. You need the help of outside experts experienced in the IPO process – including underwriters, lawyers, auditors, finance and tax advisors and investors relations specialists), along with no shortage of talent within the company (such as board members and of course company management).

Sketch Out a Timeline

In the public offering process, there is an intensive execution phase that lasts roughly three months. During this time, several important tasks will have to be done – including prepping the preliminary prospectus to send to regulators and finalizing filing documents – along with smaller but still-important activities involving advisers, regulators and management. So you’ll need to have someone on your team tasked with overseeing the going-public process to manage and keep track of all these key activities. Or you can contact some business management consultants to deal with it.

Final Steps in Developing the IPO

It’s decision time. Using information obtained while doing research on market conditions for your IPO, you’ll have to put that newly accumulated knowledge into action. Decisions in this vital stage include:

  • What type of securities will be issued;
  • Their number;
  • Their price they’ll be issued at;
  • and just what exchanges they’ll trade on (remember, you don’t have to limit yourself to Canada – listing on a U.S. exchange is also an option)

Once all these important steps are done with – and your company is confident with the results – the IPO process can move on to the execution stage.

Author bio:

Lori J Sanders was born and raised in Toronto. She has been a proponent of business education, investing, a self-help author and a motivational speaker. She operates on her own blog and she speaks up on whatever that comes to her mind about finance, investment, mortgage renewals. With various real-estate investments, she retired at the age of 46. But she still continues to operate external business ventures and various investments. For more information, follow her on twitter.