Guide to Going Public
Success factors in getting IPO ready
We have found that companies with successful IPOs:
Evaluate capital-raising options
Start early with a holistic discussion about the strategic
options offered by the capital market, and consider an array
of exit and funding alternatives in an IPO readiness
assessment.
Consider a multitrack approach and the expanding
number of capital-raising strategies - including IPO, a
strategic sale to a strategic buyer or financial investor
(PE or VC).
Preserve optionality with early IPO readiness preparations
to get IPO ready, to achieve flexibility in timing and
pricing, and to prepare for more narrow IPO windows.
Prepare early
▸ Approach the IPO as a transformational process rather than
just a financing event. Begin with a holistic IPO readiness
assessment as a first step, ideally over a 12-24 month
timeline.
Begin the IPO readiness process early enough so that your
pre-listed company acts and operates like a public company at
least a year before the IPO.
Assemble the right team of external advisors, and commit
substantial internal resources to the IPO team and process.
Build a quality management team, and a robust financial and
business infrastructure, corporate governance and investor
relations (IR) strategy that will attract the right investors.
Build a robust and disciplined approach to evaluate the
companies' non-financial performance, such as environment,
social and governance (ESG).
Address investors' concerns
► Recognize the need for enhanced corporate governance,
recruiting qualified non-executive board members,
improving internal controls and forming a qualified audit
committee.
Fine-tune your internal business operations through working
capital management, regulatory risk and rationalizing the
business structure.
Demonstrate an embedded commitment to ESG values and
culture.
► Develop the capability to comply with new financial
reporting standards and securities regulations.
Outperform competitors on key benchmarks
Investors base their IPO investment decisions on financial
factors, especially debt to equity ratios, revenues, return on
equity (ROE), profitability and earnings before interest, taxes,
depreciation, and amortization (EBITDA).
Investors base an average of 40% of their IPO investment
decisions on non-financial factors, including the quality of
management, corporate strategy and execution, brand
strength and operational efficiency, and corporate
governance.
Focus on profitability and cash flows or articulate a clear
path to profitability, and a compelling equity story backed by a
strong track record of growth that sets your company apart
from your peers while maximizing value for owners.
What are the critical IPO success factors for
institutional investors?
Investors will decide whether they buy shares of your IPO or not.
This is why EY teams recommend that you view your IPO from an
institutional investor's perspective. Institutional investors drive
stock prices, and include mutual funds, hedge funds, banks,
insurance companies, pension funds, larger corporate issuers and
other corporate finance intermediaries.
Based on our experience, the most important IPO success factors
to investors are:
1.
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Strong management team
Compelling equity story
2.
3.
Fair valuation
4.
Good corporate governance
5.
6.
Be "IPO ready" to meet capital market requirements and
investor expectations
ESG-embedded business strategy
8| Guide to going public
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