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."