If the pandemic era taught us anything, it’s that IPO windows can shift faster than expected. The rush of 2021 showed how quickly opportunity can appear, and the slowdown in 2022 reminded us how quickly it can fade. Since then, we’ve seen windows open and close in shorter, more selective bursts, with a handful of marquee offerings periodically lifting sentiment before conditions settle again.
A fully engaged IPO process typically takes six months, from engaging underwriters to pricing the offering. However, early preparation can save time, boost your chances of success, and provide the flexibility to meet your desired offering structure and timeline. Here are the key steps to ensure you’re ready for a successful IPO and don’t miss the next favorable window.
How to Prepare for an Open IPO Window
1. Hire experienced advisors
Don’t wait until you’re fully committed to going public to hire experienced legal, financial, and accounting advisors (ideally, ones who have been through the IPO process many times).
Good advisors will not only prepare you for a potential IPO but also help you determine if it’s right for your company in the first place.
Jonathan Truppman was the Chief Legal Officer at Oddity when it went public in 2023. He says: “Ensure you have folks around the table – lawyers, bankers, and advisors – that are not only up-to-date on investor and regulator concerns, but also provide you candid and proactive advice, rather than just pushing to get a deal done with ambitious timelines.“
2. Build relationships with banks
Truppman recommends starting the banker selection and investor education process long before your RFP and banker bakeoff.
“Whether through a prior transaction, financing, or other educational process, you should already have had interactions with your short list of banks during your evolution as a private company, ” he says. “Not only does this help build relationships and identify the individual bankers most situated to your deal, it also allows the bankers to understand your business and speak to the trends and opportunities rather than just the financial snapshot at the time of IPO. “
3. Understand your target investors
Think of the IPO process as a marathon, not a sprint. For companies with a compelling narrative, early investor engagement through non-deal roadshows and “testing the waters” meetings may start as far as 12-18 months out. This de-risks the IPO process by providing companies with feedback and visibility into what investors are looking for and an opportunity to build trust. Companies that may be planning an IPO in 18-24 months can also begin developing investor relationships through participating in events as a private company, well before the IPO.
Next, work with your advisors to conduct a public company readiness assessment. This will help you understand the requirements for going public, determine if it’s the right move for your company, and establish a timeline for becoming IPO-ready.
4. Do a public company readiness assessment
IPO readiness goes beyond the moment of “going public.” The ability to deliver consistent results and establish a “beat and raise” cadence post-IPO is critical to achieving aftermarket liquidity and other benefits of being public. To get there, financial planning and analysis, accounting, external reporting, and governance functions require time and attention. Working with skilled advisors to conduct a public company readiness assessment will also
help you understand the requirements for going public, determine if it’s the right move for your company, and target optimal timeframes for entering the market.
A thorough public company readiness assessment should address:
Financial reporting and internal controls readiness
- Identify personnel needs.
- Assess Sarbanes-Oxley Act of 2002 (SOX) compliance readiness.
- Assess annual and quarterly financial statement closing timeline readiness.
- Start practicing mock earnings calls and refining forecasting and disclosure discipline.
- Review IT and cybersecurity readiness.
Audit and tax readiness
- Identify key accounting and tax issues.
- Confirm auditor independence.
- Flag “cheap stock ” exposure and/or remediation measures required.
- Review past or planned significant acquisitions to determine financial statements required.
- Map Public Company Accounting Oversight Board (PCAOB) audit timelines.
Legal readiness
- Identify and analyze legal risks, such as:
- Data privacy risks, including regulatory compliance (General Data Protection Regulation, California Consumer Privacy Act, and others)
- Other regulatory risks
- Intellectual property risks, including related to disputes, patent coverage, Proprietary Information and Inventions Assignment Agreements, and contractor agreements
- Pending or threatened litigation exposure
- Audit the company’s capitalization table to identify what actions may be required to ensure all company equity is properly authorized and issued.
Governance readiness
- Determine what changes to the executive team may be necessary or desirable.
- Review board composition and identify changes needed to:
- Meet stock exchange independence requirements
- Enhance the collective expertise of the board to improve performance, anticipate investor demand or meet stock exchange requirements
- Form stock exchange-compliant committees
- Establish go-forward refreshment and pipeline mechanics
- Build practices and structures to support post-IPO board functions, such as:
- Allocating risk oversight responsibilities among board committees
- Establishing a cadence of board and committee meetings
- Creating a calendar for recurring board and committee agenda items
- Considering how to handle board education
- Training the management team to provide streamlined materials
- Determining director communication mechanics (e.g., board portals, devices)
- Audit existing charter, bylaws, and governance policies to address gaps, including consideration of:
- Your desired stock structure (single- or multi-class)
- Appropriate stockholder activist protections
- Corporate domicile
Human resources readiness
- Review compensation practices to see if they are competitive, appropriate, and ready to withstand public scrutiny.
Note that this isn’t a complete list, and your advisors can help you determine the full picture of the assessments you’ll need.
5. Establish a plan and timeline for addressing issues
Good advisors will help you address these matters in a pragmatic and cost-effective manner, giving you maximum flexibility to pursue your IPO on your desired timeline without incurring unnecessary costs or making needless changes.
6. Prepare required statements
Depending on your timeline, begin preparing the required PCAOB audited financial statements and any required acquired company financial statements.
Audited financial statements are often a source of delay for IPOs, because (with certain exceptions your legal team will help you identify) they are required before you can submit your draft registration statement to the SEC for review. You can continue to prepare many other public company readiness tasks while the SEC reviews your registration statement, which is a multi-month process.
7. Manage any cheap stock issues
Sooner rather than later, make any retrospective stock-based accounting changes required to deal with cheap stock issues and increase the frequency of your 409A valuations, ideally obtaining them at the same time as issuances.
8. Prepare for certain key determinations
You’ll also want to start preparing for certain key determinations that will be required as part of the registration, marketing, and going-public process, including:
- Developing your marketing story for a public investor audience
- Identifying and defining the key operating metrics you plan to disclose to investors
- Preparing your financial model/projections for analysts
- Defining your total addressable market
- Drafting initial key sections of your registration statement, such as the business, management discussion and analysis (MD&A), and risk factor sections.
Being thoughtful and comprehensive is essential. “It is incredibly important that both you and your auditors feel comfortable with the key metrics (including definitions) that are presented,” says Truppman.
He recommends doing a full audit of your accounting treatments and definitions far in advance of the IPO. “This ensures they withstand scrutiny and you don’t have to pull certain metrics or make adjustments to accounting policies that could result in restatements and significant delays to the process,” he says.
9. When in doubt, over-prepare
There are countless other issues to address once you decide to take your company public. Many of those things can wait until you are committed to an IPO, but if you want to maximize your chances of hitting an open window, it’s worth getting started sooner rather than later.
Truppman’s advice? “You cannot be over-prepared enough – build as much buffer as you can in your timelines, ensure you have clear lines of communication across the syndicate and with outside third parties, and be ready to create strategic alternatives to pivot quickly to get a deal done.”
Contributors
Featuring Insights From: Jonathan Truppman, Chief Legal Officer, Oddity
