Preparation for capital markets transactions can be onerous. The transactions can deliver huge benefits but not without careful and thorough preparation. Preparing well in advance will help to:
- Identify and resolve potential issues early
- Reduce pressure on management at the time of IPO
- Ensure that the company is in a position to undertake an IPO at short notice when market conditions are optimal.
Are you considering an IPO?
We will provide you with an IPO readiness review. This is a free of charge assessment of how prepared your company is for a future IPO, with a particular focus on the accounting and financial aspects. The review will provide your Board and its advisers with an indication of practical steps that should be taken to assist a future IPO process.
Why perform an IPO readiness review?
Whether your IPO is planned for the near future or is still just an ambition, the preparation work can be onerous. A review identifies opportunities to bring work forward and thereby reduce the pressure on management nearer to the IPO. Our experience is that only the most prepared companies are able to take advantage of windows of opportunity and meet investors’ requirements.
What does the IPO readiness review include?
Typically, the brief review highlighting priority areas, tailored to IPOs on most major stock exchanges. The report includes practical insights and recommendations. The review will also identify all potential future obstacles so you can start addressing them.
Key IPO issues
The following key areas of IPO readiness will benefit from early consideration. This is an extensive and, at first glance, daunting list. BDO can advise and assist you on any or all of these areas:
Choice of market
- Have you considered all the available capital markets that your business may be suited to?
- Get guidance from the appropriate advisers; BDO’s capital markets team is always happy to assist with introductions
- The choice of market has a knock-on impact on a number of the considerations below.
Corporate structuring and taxation
- Assess whether the corporate structure and jurisdiction are acceptable to investors
- Plan changes to structure and jurisdiction as required by investors
- Consider whether changes are needed to the corporate structure in order to optimise tax for existing owners, anyone proposing to exit on IPO, future investors and your business
Dividend policy and blocks
- You will need to have a dividend policy post IPO.
- In the UK, dividends cannot be paid out on an aggregate reserves basis, so you need to ensure there is a clear path from the trading companies for distributions. Other jurisdictions may have different restrictions that need to be considered
Historical financial information
- Prepare full accounts under IFRS which should then be audited
- These are usually needed for at least the last 3 years. Interims may also be needed for a more recent period if the last audited year end is not recent
- Prepare full accounts on any significant acquisitions in the last three years and get these audited, depending upon the market selected
- Prepare financial projections covering a period of at least 18 months from the anticipated date of IPO. These projections will therefore need to be suitably detailed and capable of being easily flexed for sensitivity analysis
- Financial projections for a longer period are likely to be needed for valuation purposes
Financial position and prospects procedures
- Ensure that the procedures for establishing and reporting the company’s financial position and prospects are appropriate for a public company
- You will need to consider matters such as financial reporting systems, management accounts, budgeting, forecasting, board procedures and board reports, and reporting timetable
- Consider the implications of existing share schemes and determine further share option or other incentive schemes which might be put in place for directors and employees either pre-IPO or on IPO.
- Consider bonus structures that will incentivise your employees to work hard for your business. This will be key to the success of the IPO
- Ensure that the management team is functionally complete and a succession plan is in place for key directors and members of the management team
- Start looking for non-executive directors that can add value to the IPO process
- Ensure that the finance team is suitably resourced. The finance function will need to deal with the IPO process and the reporting timetable of a public company
- Consider appointing a specific project manager for the IPO.
- Prepare files of key contracts, financial and tax documentation for the due diligence and verification process.
- Ensure that the group’s tax affairs are up to date and in order.