6 Key Questions to Address Before Initiating the IPO Process

Post Creator: Rosie Bartley

By Lee Stettner and Steve Parish | article

An IPO is a landmark event for a company and preparing to go public requires a significant amount of time and resources. The IPO process is opaque and challenging, and as soon as you kick it off, you will be inundated with deadlines, filing requirements, and competing interests vying for your management team’s attention.

So, prior to embarking on the path to the public markets, it’s critical to determine that your company is truly ready and has positioned itself to identify the best bankers, analysts, and investors to ensure a well-executed IPO. Here are a few key questions to address before initiating the IPO process.

1. Have you refined your equity story and presentation?

Many companies have existing corporate presentations that may have been used for a variety of purposes, such as raising private capital. To position your company and messaging toward analysts and public market investors, however, you will likely need to revise and enhance that presentation. If you hope to meet with analysts or the buy side, you should have a presentation that highlights your value proposition, why it is critical, how you uniquely solve this need, and the market opportunity. Ultimately, the analyst and buy-side community should be able to efficiently understand the strategy, business model, and equity thesis.

2. Have you met with the right sell-side analysts?

The sell-side analysts at the banks underwriting your IPO will most likely publish on the company once you are public. Building a rapport early and helping them build familiarity with your story is key. In addition, connecting with sell-side analysts early in the process and keeping them current on your story will enhance their broader industry knowledge.

3. Have you met with buy-side thought leaders in your space? 

Whether these meetings take place at conferences or during a non-deal roadshow, it’s crucial to meet the investors who may own your stock one day. Ideally, you should start building these relationships well before your IPO roadshow. Keep your conversations with the buy side more of an open dialogue and conclude your meetings by asking for feedback on your story.

4. Do you have the right banking relationships?

Sector and deal execution experience matters. To make sure you have the right supporting team for your IPO, participate in multiple discussions with potential bankers to assess each firm’s capabilities, banker skillsets, and focus. You can also assess potential bankers by requesting specific insights around your sector, asking them to organize meetings with investors, or soliciting feedback on your equity presentation.

5. Have your financials been finalized and projections stress-tested with the right guidance metrics?

Going public requires fully audited financials for the past two years. This process should be finalized prior to beginning the IPO process, as changes to your historical numbers during the process can hurt your credibility. Additionally, begin to think about what metrics you will provide to assist analysts in building and forecasting their models. The underlying assumptions used in your forward-looking projections should be well-founded, logical, and verifiable. Analysts and investors will begin to build their financial models based on those metrics.

6. Do you have a public-company-ready management team and board?

Qualified board members are highly sought after, and it will take longer to bring them to your team than you may anticipate. When compiling your board, make sure your committee chairs have the appropriate expertise, and start pulling together the right members sooner rather than later. The public markets are much more rigorous and scrutinizing than your management team may be accustomed to, so ensure that your senior team is complete and prepared. In addition, you may need to bolster your financial reporting department, as their work is a mission-critical part of operating as a public company.

Based on your answers to these questions, is your company ready for the public markets? If you’re contemplating an IPO, ICR Capital can help. We work with clients at any point in the IPO process and in any market conditions, with the goal to make the IPO process as smooth as possible and help clients maintain their long-term credibility with the Street. To start the conversation, contact ICR Capital today.