Introduction

Moving a privately owned company to a public market will take time and detailed planning is required. In accounting terms the key elements for success are:

  • Sound and effective financial controls
  • Timely and accurate management reporting
  • An experienced CFO
  • IFRS, US or suitable national GAAP compliant audited financial statements
  • Realistic and supportable financial projections
  • Taxation planning will be required at an early stage for the company and shareholders

In commercial terms, a successful IPO candidate must demonstrate Quality, Good Governance and Value.

What are Investors Looking For?

  • A growing business operating in an expanding markets
  • International exposure or potential to expand overseas
  • Sustainable competitive position
  • Visibility of earnings
  • Quality of earnings
  • A committed and experienced management team
  • A commitment to strong corporate governance procedures
  • Sector approach based on macroeconomic factors

How To Become Investor Ready

Improve the “quality” of your profits by:

  • A strong and complete management team with clear succession planning
  • A scalable business model, growing organically or by acquisition
  • A move to higher value and higher margin products
  • Build barriers to entry based on technical excellence, market knowledge or scale
  • Robust and reliable accounting and management information system
  • Enhance corporate governance and appoint non-executive directors early
  • Capital restructuring or reorganisation, consider share incentives, regulatory approvals
  • Build defendable rights over intellectual property
  • Dispose of non-core activities and assets
  • Identify strategic acquisitions and mergers
  • Adopt International Financial Reporting Standards or local equivalent
  • International Audit Standards Compliance
  • Tax review of compliance and planning issues, national and international
  • Reduce dependence on particular customers, products, suppliers or staff
  • Review terms of trade and strengthen credit management
  • Appoint experienced advisers

IPO Capital Structure

Use of an offshore Listco – decision based upon:

  • Reputation
  • Skill pool
  • Tax transparency
  • Flexible corporate laws

Other considerations

  • Takeover code
  • Uncertificated shares
  • Pre-emption rights
  • Shareholder disclosure
  • Geography

Overall choice

  • Make it easy for new investors to invest and understand

Conclusions

1 Demonstrate Quality, Good Governance and Value

2. Moving a privately owned company to a public market will take time, detailed planning is required

3. Increasing the “Quality” of profits will increase the value of your business

4. The value of the business on IPO is less important than the value 12 months later, do not over value

5. Admission to a market is the start of a process, not the end

6. Liquidity and valuations must be developed – “Invest time and effort in the market and the market will invest in you”