As market conditions present volatility and uncertainty, companies are increasingly delaying plans to enter the public markets to the second half of 2023 and beyond. While an IPO may be more than a year away, various workstreams and activities can be started in the short term to help successfully execute a transaction more efficiently.
Below we discuss the proposed timing of a selection of these activities, which can enable companies to evaluate where they currently are in their journey to operating as a public company.
IPO Timeline and Activities
IPO Readiness Assessment
A readiness assessment provides a tailored roadmap that bridges their current state of operations to on the path toward operating effectively as a public company. The assessment also can facilitate internal discussion and alignment on the company’s priorities ahead of a public company listing.
Engage External Advisors
A company pursuing an IPO will need to engage a variety of new advisors and third parties to successfully execute the transaction. These can include accounting advisors, SEC counsel, underwriters, HR and compensation consultants, tax specialists, and investor relations firms. Determining suitable advisors for your company ahead of kicking off the IPO process can enable a more efficient transaction and provide time for the company to do an appropriate level of due diligence.
Implement New Systems
It is common for a company considering an entry to the public markets to need an upgrade to its accounting, procure to pay (P2P), HRIS, FP&A, or reconciliation systems. Additionally, a CFO or Controller may want to evaluate automated solutions to current processes to improve operational efficiency. An output from an effective IPO Readiness assessment can provide a CFO with a timeline for assessing, selecting, and implementing the systems to function efficiently in a public company environment.
Initiate Hiring Plan
A private company will typically need to build out its teams and functions to meet the demands and requirements of public company reporting (e.g. Investor Relations). By determining staffing and skill gaps through an IPO Readiness assessment a company can provide itself with sufficient runway to complete its hiring plan and enable employees to onboard ahead of the IPO.
Prepare Regulation S-X Financial Statements
Upgraded financial statements that meet the Regulation S-X disclosure requirements will be needed for any prospective S-1 filing. CFOs and Controllers may want to consider whether upgraded statements should be prepared in conjunction with their current year audit to facilitate inclusion in a future S-1 filing. This approach limits the “uplift” and additional audit work that may be required on the financial statements when the S-1 registration statement is being prepared.
Audit and SAS 100 Reviews
Private companies under an AICPA audit opinion should liaise with their external auditors to determine when a PCAOB level scope of audit work is appropriate for their current circumstances and future IPO plans. Additionally, companies should discuss with their external auditor the timing of interim SAS 100 procedures over their quarterly financial information. The periods to be included in a prospective S-1 filing will inform the company on which quarters may be subject to SAS 100 procedures.
Establish Investor Relations Function
A company will need to stand up a new Investor Relations function to effectively communicate with the Street and institutional shareholders. It can be common for companies to outsource this function initially and then transition to “in-house” as the company matures. CFOs may want to consider what operating model will work best for their IR function so that there is appropriate time to hire up or onboard an external firm.
On the IPO journey, at no point should you be standing on the sidelines waiting for markets to play out. Due to the variety of organizational and regulatory activities required over the course of more than a year, starting the journey now can ensure optimal IPO readiness when the day does finally come.
For expert IPO readiness support, contact CrossCountry Consulting today.