How well rehearsed
are you for the
public stage?
Steps to consider before issuing an IPO
Going public involves intense
scrutiny and analysis from
investors and the competitive
marketplace. As a part of an
initial public offering (IPO), you
need to create a compelling story
that acts as a tool that facilitates
the sale of the company’s stock
to prospective investors. The
story needs to include growth
plans, governance, corporate
structure and accounting
standards alignment.
What are your
future plans?
A company’s past and future outlook are vital to a successful IPO. To
begin building your IPO story, you’ll need to review the past five years of
the business and account for all of the “ups and downs,” demonstrating
the company’s progress and performance.
The story should include the forecasted outlook for the next five years,
which is typical for future projections. When evaluating your outlook, it
helps to include your long-term plans, including new services, products
or innovative growth plans. These pieces demonstrate to investors and
the market the company’s stability, and provide a greater reason to
accept and support the IPO.
Valuation
The company’s market valuation is a key component in the preparation
to go public. The valuation is an indicator of how the company will be
received by investors and stakeholders. If it’s weak, there may not be
sufficient interest in the offering, and the stock is unlikely to be traded
once on the public market.
Checklist
• Business performance review
of the past five years
• Forecasted outlook for the
next five years
• Audit of three years’ financial
statements
• Comparative analysis
Another important step in preparing the valuation is to conduct a
comparative analysis of public companies with similar products or
services. This analysis will aid in demonstrating if the market is ready
for a company and showing where adjustments may need to be made
to increase the likelihood of success. The analysis will include reviews
of financial statements, operational structure board of directors
composition and year-over-year growth, all which create the foundation
for a compelling company story.
How well rehearsed are you for the public stage?
Steps to consider before issuing an IPO
| 1
Governance and
corporate structure
Timing and market
readiness
It’s important to complete a thorough review of the board
of directors, if you have one in place. If you do have a
board, it’s important to indicate if there are any upcoming
changes, or dissention among the members against
an IPO.
As the saying goes, timing is everything. A company could
have everything lined up and ready to go before moving
forward, but if the timing is off and the market isn’t ready,
the efforts could be in vain. To establish market readiness,
you must first evaluate if there’s an appetite for your type
of company, and if the market is ready to accept an IPO.
If a board is not in place, you’ll need to activate one and
ensure an adequate amount of time passes before issuing.
Activating a board can take some time, and you’ll want to
conduct a proper search for the right board members with
the right experience.
In addition to a board of directors, it’s also important to
demonstrate a strong and stable corporate structure. Ask
yourself the following:
Will the structure be able to withstand the demands and
growth anticipated as a public company?
Are any changes necessary before moving further along
the IPO journey?
2 |
How well rehearsed are you for the public stage?
Steps to consider before issuing an IPO
Key items to consider include:
• Market up- and downturn
• Current risk appetite (i.e., investors’ readiness to
purchase stock)
It isn’t unusual for economies to be flush with cash
while waiting to see how the market reacts for a period
of time before investing. The timing of issuing an IPO
isn’t just dependent on the market analysis. You need
to pay attention to other possible IPOs and market
activity happening around the proposed issue date you’re
considering. If the timing isn’t right, risk appetite is low or
the economy isn’t in the best position, you would be wise
to wait until conditions improve to increase the likelihood
of success.
Is your private
company ready?
Going public is a landmark decision for any company. So
many pieces need to fit together: a compelling story must
be told with a perfect storm of the right timing, the right
economic conditions and the right financing. All of these are
essential when issuing an IPO and maintaining long‑term
success. Having all of these key elements secured and
primed before moving forward will strengthen your story. If
just one piece falls short, the whole IPO could be in jeopardy
of falling apart.
How well rehearsed are you for the public stage?
Steps to consider before issuing an IPO
| 3
A checklist for telling a compelling
IPO story
4 |
How well rehearsed are you for the public stage?
Steps to consider before issuing an IPO
R
C
ompany history in good account
R
A
udit of 3 years’ financial statements
R
M
arket valuation of the company
R
S
uccessful growth plans forecasted
R
B
oard of directors established and in
support of IPO
R
A
solid corporate structure
R
M
arket readiness assessment
We can help
To learn more about how our Private
Client Services professionals can help you
navigate the IPO process and help get you
ready for the public stage, contact us at
[email protected].
Visit us at ey.com/ca/private.
How well rehearsed are you for the public stage?
Steps to consider before issuing an IPO
| 5
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