roadmap-for-an-ipo-a-guide-to-going-public

RoadmapforanIPOAguidetogoingpublicContentsIntroduction201Thegoing-publicdecision402Preparingforasuccessfuloffering1303Currentregulatoryanddisclosuresissues2604Thegoingpublicprocess3805Lifeasapubliccompany5906Otherconsiderations71Conclusion79Appendices86AppendixAThe“kick-off”organizationalmeetingandplanningprocess87AppendixBGlossary89RoadmapforanIPO|Aguidetogoingpublic2PricewaterhouseCoopersIntroductionGoingpublicisamonumentaldecisionforanycompany.Itforeverchangeshowacompanygoesaboutdoingbusiness.Apubliccompanyhasaccesstomore,andoftendeeper,sourcesofcapitalthanaprivatecompany.Theactualprocessofgoingpubliccanbetime-consumingandpresentscertainuniquechallengesthatacompanyshouldbepreparedtoundertake.2RoadmapforanIPO|Aguidetogoingpublic3Aninitialpublicofferingisatransformationaleventforanorganization.Thepreparationfor“beingpublic”isjustasimportantasthepreparationfor“goingpublic.”Acompanywillneedtomeetadditionalrequirementsandcontinuingobligationsasapubliccompanythatmayrequirenewskillsets,additionalresourcesandchangestothebusiness.Thinkingthroughtheserequirementsinadvanceanddevelopinganappropriateplanisthekeytoasuccessfulentryintolifeasapubliccompanyandwillreduceunexpectedpost-IPOissues.Asthenumberofcompanieslookingtoaccesstheequitymarketscontinuestogrow,wearepublishingthisfiftheditionofRoadmapforanIPO,whichaddresstheUSIPOprocessandtheimpactofgoingpublic.Thispublicationcontainsinformationthatacompanywillneedwhenitdebateswhethertogopublicortopursuealternatemeanstofinancegrowth.Thepurposeoftheguideistohelpcompaniesmakeinformeddecisionsbyaddressingfactorssuchastheadvantages,disadvantages,costs,timing,andalternativestogoingpublic.Itoutlinestheprocessofgoingpublicanddiscussestheregistrationandongoingreportingrequirementsofapubliccompany.Finally,theguidesummarizesthemostsignificantaccounting,compensation,andtax-relatedconsiderationsofgoingpublic.Wehopeyoufindthisguideahelpfulandaneasy-to-usereferenceforplanningandexecutingasuccessfulIPOasyoudeterminethebestpathforsustainingyourcompany’sgrowthnowandintothefuture.01Thegoing-publicdecisionWhatdoes“goingpublic”mean?Itistheprocessofofferingsecurities—generallycommonstock—ofaprivatelyownedcompanyforsaletothegeneralpublic.Thefirsttimethesesecuritiesareofferedisreferredtoasaninitialpublicoffering,orIPO.5RoadmapforanIPO|AguidetogoingpublicTIPDuringtheIPOprocess,companiesoftenunderestimatetherequirementstocompletethetransactioninadditiontotheongoingobligationsandscrutinyoflifeasapubliccompany.Anearlyassessmentofacompanypreparingtogopubliccoulduncoverunforeseenissues,including:•Financialreporting•Tax•Governance•Internalcontrols•Compliance•Humanresources•Structuring(legal)Whatisapublicoffering?AnIPOinwhichacompanysellsitsunissuedsecuritiesandreceivesalltheproceedsintheformofadditionalcapitaliscalledaprimaryoffering.Asecuritiessaleinwhichsecuritiesheldbytheownersofthecompanyaresold,andfromwhichtheownersreceivetheproceeds,iscalledasecondaryoffering.IPOsarealmostalwaysprimaryofferings,butmayincludethesaleofsharesheldbythepresentowners.WhyamIgoingpublic?ThemostimportantquestionaCEOshouldaskis,“WhydoIwanttogopublic?”Someofreasonsinclude:•Toaccesscapitalmarketstoraisemoneyfortheexpansionofoperations•Toacquireothercompanieswithpubliclytradedstockasthecurrency•Toattractandretaintalentedemployees•Todiversifyandreduceinvestorholdings•Toprovideliquidityforshareholders•Toenhancethecompany’sreputationOtherreasonsmaybeprivateandpersonal.Itisimportanttokeepspecificgoalsinmindthroughoutthegoing-publicprocess.Isgoingpublicrightforyourcompany?Acompanyusuallybeginstothinkaboutgoingpublicwhenthefundingrequiredtomeetthedemandsofitsbusinessbeginstoexceedthecompany’sabilitytoraiseadditionalcapitalthroughotherchannelsatattractiveterms.Butsimplyneedingcapitaldoesnotalwaysmeanthatgoingpublicistheright,orevenpossible,answer.Thereareanumberofquestionsthatacompanyshouldaskitselfbeforedecidingtogopublic.Doesyourcompanyhaveanattractivetrackrecord?Generally,acompanythatoutpacestheindustryaverageingrowthwillhaveabetterchanceofattractingprospectiveinvestorsthanonewithmarginalorinconsistentgrowth.Investmentbankerswanttheofferingthattheyunderwritetobesuccessful.Therefore,theylookforcompaniesthatcanfulfillseveraltriedandtruecriteriatoboostthechancesforasuccessfulofferingandgoodperformanceintheaftermarket.Herearesomeofthemostimportantfactors:•Anattractiveproductorservice,preferablyonewithacompetitiveadvantageandsufficientlylargemarket6PricewaterhouseCoopersTIPCompaniesneedtoobjectivelyassesstheirreadinessforlifeasapubliccompany.Goingpublicrequiresmanagementtobepreparedtomeetshareholderandmarketexpectationsfromdayone.Companieswillneedtoaddressongoingcomplianceandregulatoryrequirements,operationaleffectiveness,riskmanagement,periodicreporting,andinvestorrelations.•Anexperiencedmanagementteam•Apositivetrendofhistoricalfinancialresults•Favorablefinancialprospects•Awell-thought-out,focusedbusinessplan•Strongfinancial,operational,andcompliancecontrolsThoughsomecompaniesmaynotcurrentlymeetallofthesecriteria,investorsmaypercei