Navigating the IPO Landscape
Key steps toward evaluating your organization for public company status in 2023 and beyond.
There's been noticeable chatter in the pre-IPO market over recent months. Businesses are beginning to shift their focus, getting ready for potential public market debuts throughout the remainder of 2023 and beyond. With the robust lineup of pending IPOs — including Stripe, a payments processing company valued at over $50 billion, and Databricks, a cloud-based data infrastructure company valued at over $30 billion — the IPO window is opening, prompting companies to reevaluate their plans.
Regardless of the size of the organization, preparation is key to capitalizing on the market opportunities ahead. Companies anticipating a public move over the next year must begin now.
Charting the IPO Course
In order to map out crucial steps on the IPO journey, you must understand the organization’s pre-IPO posture. This is achieved through a comprehensive public company readiness assessment — a customized strategy that connects a company’s current operational state to a model that will lead the company to successfully perform as a public company. Aside from ensuring a company’s smooth transition from private to public, an assessment also opens the door for internal discussions among the board, the audit committee and the executive team, all with the objective of aligning the company’s priorities ahead of the public company listing.
It’s important for each aspect of the business (people, processes and culture of the organization) to undergo the necessary preparation to be fully IPO-ready, both as separate entities and as a cohesive whole. Examples include:
- Accounting close. Being able to close and report the monthly results on a timely basis and incorporating a heavily automated month-end close process.
- Accounting policies. Ensuring documented accounting policies for the adoption of all new accounting pronouncements in accordance with public company reporting deadlines.
- Cybersecurity. Maintaining an established cybersecurity and privacy program that addresses the risk profile of the business, including regular monitoring and reporting of cybersecurity threats.
- External audits. Engaging a Big 4 or national accounting firm capable of producing a PCAOB-compliant financial statement audit while confirming the audit is performed within SEC reporting deadlines (75 days).
Optimizing Key Functions and Activities Prior to Your IPO
A public company readiness assessment provides several advantages, such as the ability to identify potential exposures and mitigate risks before going public, the opportunity to develop a plan to address any identified exposures, a process that attracts a wider range of investors and a program to improve corporate governance practices. Failing to conduct an impartial evaluation of the internal adjustments needed for the smooth operation as a public company can lead to disruptions and even failure during the IPO journey. To stay on course for success, companies must either establish entirely new functions or enhance their existing key activities.
The top five examples of critical areas of the business include:
- Accounting and financial reporting.
- Internal controls.
- Financial planning and analysis.
- Governance and compliance.
Driving IPO Success with Reduced Risk
The journey of becoming IPO-ready involves meticulous planning, risk assessment and a commitment to strengthening core functions.
IPO preparedness isn’t just a milestone; it’s a crucial step toward a promising future of financial opportunities and corporate excellence.
Kati Penney is corporate transactions lead at CrossCountry Consulting.