IPO Readiness Practical Tips for General Counsel: “Ready? Set! Go Public” Part 2 of 6
So you think you’re ready for an IPO?
You’ve decided that you want to execute that next step and take your company public. Now what? “You’re only as strong as your weakest link”; “No man is wise enough by himself”, and my personal favorite from Michael Jordan, “Talent wins games, but teamwork and intelligence wins championships.” I know they may sound cliché, but they resonate truth! Where do you begin? You may have a good company, a talented company, but only a solid team utilizing intelligence wins when it comes to the market. Create a high-level project plan so that you have a better understanding of the tasks, expertise, and skills needed. You’ll require the right executive team with experience in IPOs. Choose first-class advisors and carefully ensure all of your bases are covered; this includes anticipating curve balls and planning for unforeseen obstacles.
Understand the cost. This is your company on a silver platter being presented for all the world to see. This is no time to be penny-wise and pound-foolish. You will need to consider costs for attorneys, accountants, and consultants. Building the team that will best help you through the process is the objective.
It is wise to play out all potential scenarios. What happens if things don’t go as planned and you feel as though you need to pull out? Be aware that there is a difference between a delayed IPO and an aborted IPO. Your bottom line will be affected so it’s important to become familiar with both scenarios. While the IPO is under way, all expenses related to it are recorded on the balance sheet as “other asset”. If the IPO is successful, the expenses are deducted from the proceeds of the IPO and never hit the P&L.
So what exactly is the difference between a delay and aborting?
A delay is a temporary setback. If an IPO is delayed, the quarterly financials need updating, so there will be ongoing activities and costs. You have to discuss this with the underwriters, attorneys, and auditors, but you do not need a board vote.
Aborting is exactly like it sounds; it is the termination of the process. It is permanent. When you formally pull the plug on the IPO, all the costs related to this effort will be written off your balance sheet and hit your bottom line.
For an undertaking of this magnitude, and with so many shareholders’ interests at stake, be sure to enlist experienced professionals, preferably those who have traveled the IPO route before, who can advise and assist you as you build your IPO “dream team”.
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