Prepare Now For IPO Later

Top performers start implementing changes 12 to 24 months prior to listing, survey says.

Given the current financial environment, now may not be the right time to launch your firm into the initial public offering (IPO) market. On the other hand, it may be a fine time to start preparing for an IPO if going public is a business goal.

So suggest survey results from Ernst & Young, which show that outperforming companies generally start acting like public firms at least one year prior to going public. "Market outperformers start implementing critical changes -- such as strategic planning, building the right team, implementing controls and systems -- a full 12 to 24 months ahead of listing," says Gil Forer, global director, Cleantech, IPO and Venture Capital Initiatives at Ernst & Young.

Further results from the "Measures that matter 2008" survey show that about 60% of institutional investors base their IPO investment decisions on financial performance measures, with the top three most important being earnings per share growth, EBIDTA growth and profitability growth. Meanwhile 95% of institutional investors cited management credibility and experience as a key non-financial metric.

Other results from the survey indicate:

  • About one-third of executives at outperforming companies had prepared the composition of their company board more than six months before listing.
  • The three most challenging corporate governance issues cited were recruiting qualified independent board members, enhancing internal controls and forming a qualified audit committee.
  • About 24% of executives surveyed had begun building an investor relations team more than six months before the IPO.

Says Forer: "Executives who have overseen successful IPOs focus on being a public company, not just becoming one. They position themselves as public entities long before the event."

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