IPO diagnostic
Going public can bring numerous benefits to your company. However, before you start to prepare for an initial public offering (IPO), you should consider your strategic objectives.
You must also determine to what extent your company is ready for an IPO and what steps need to be taken in order to be perceived favourably by potential investors, increase the value of the business, and be able to operate as a public company.
IPO diagnostic is a structured way of analysing and reporting on a company’s readiness for going public. It is essentially hiring an advisor to do due diligence on yourself.
Key areas of a diagnostic include:
- Financial reporting procedures and internal controls
- Corporate structure and tax considerations
- Financial track record
- Corporate governance
The output is a roadmap of what needs to be addressed during the IPO preparation process. The project does not take long; depending on each particular case, it takes about 3-6 weeks from start to finish.
Standard scope of IPO diagnostic
Clear strategy and stable financial position
- Vision and mission
- Integrated strategic and business plan, budgets, forecasts and performance management
- Appropriate management team to execute the strategy and run a UK public company
- Proven financial track record (3 yrs audited financials)
- Credit history/rating
- Dividend policy
Transparent structure
- Established transparent legal structure
- Functional and flexible tax structure & tax compliance process
- Ability to function on stand-alone and arms-length basis
- Defined and respected group management reporting lines
- Executives motivation & remuneration including share incentives
Corporate governance
- Composition and organisation of the Board
- Independence and objectivity
- Separation of Chairman of the Board and CEO
- Size of the Board
- Sub-committees (Audit, Nomination and Remuneration)
- Board remuneration
- Delegated Authority (incl. reserved matters for the Board)
- Board reporting procedures
- Internal Audit function
- Risk management framework and process
Timely and accurate reporting
- Robust internal processes and controls
- Ability to produce timely IFRS reporting within required time-frame
- Ability to monitor and report KPIs on a timely basis
- Corporate Treasury policy
- IT environment and security
Transparency and disclosure
- Financial reporting
- Framework
- Accountability & responsibility
- Communication
- Compliance and monitoring
- Audit and Assurance
- Disclosure
- Investor relations
Reputational predictability and corporate citizenship
- Code of conduct
- Fraud risk management policy
- Business ethics
- Health and safety, social & environmental obligations
Benefits
- Allows early identification of issues to avoid last minute surprises
- Gives management a chance to remediate findings
- Distributes the workload more evenly to avoid bottlenecks
- Minimises the disruption to the company’s business during the IPO process
- Helps accelerate time to market by positioning a company to take advantage of “market windows”
- Improves the company’s IPO expertise
- The IPO diagnostic report assists in marketing the company to investment bankers:
- It allows the company to not only show its preparedness, but also to demonstrate the actions taken to position the company for both an IPO and for being a public company
- All of this assists and streamlines the investment bankers’ due diligence process
It pays off
- It is a highly competitive market for IPOs – investors are more selective and want the highest quality deals. Preparation and quality are worth the effort – everything that improves a company helps
- Compared to the total listing costs and value received, an IPO diagnostic is inexpensive
- Based on PwC recent experience with companies planning to list, completing an IPO diagnostic is becoming market best practice
- The sooner you start to look and act like a public company, the better
