Download IPO Consulting Best Practices

What Is IPO?

An IPO, or Initial Public Offering, is the process through which a private company offers its shares to the public for the first time. A successful IPO can unlock significant capital for growth—however, it also exposes the company to public scrutiny. Executives must balance the allure of funding with the demands of transparency and governance.

The accelerating dynamic of contemporary business—as Peter Drucker, the acclaimed management consultant, noted, "The only thing we know about future is that it will be different"—prompts companies to evolve their strategies towards rapid growth. One such strategy is going public, often achieved via an Initial Public Offering (IPO). Committing to an IPO necessitates a meticulous examination of a firm's strategy, readiness, and market conditions.

Strategic Alignment of the IPO Process

To ensure the success of an IPO, it is crucial to align it strategically with the company's broader objectives. As per McKinsey's comprehensive studies, businesses need to establish a clear post-IPO roadmap and long-term vision to inspire investor confidence. The primary question before an IPO should be whether the IPO will propel the company's strategy forward or divert its focus and resources?

Readiness Assessment for IPO

Curtailing inherent risks of IPO relies on a rigorous assessment of a company's readiness. A readiness assessment evaluates the robustness of operations, governance structure, and financial management. It is widely accepted that operational readiness is equally, if not more, crucial than financial readiness. According to Bain & Company, companies which execute substantial Operational Excellence processes pre-IPO outperform their counterparts by 30% after the IPO.

The Impact of Market Conditions

Even the most carefully planned and executed IPO can be hampered by unfavorable market conditions. Company strategy and readiness need to be correlated with economic indicators, sentiment and ongoing trends in the stock market. Past data from Accenture's IPO analytics data-pool reveals that companies that went public during bullish markets performed significantly better.

Best Practices

• Be meticulous: Every aspect of an IPO requires focused attention, from filing necessary legal paperwork to conducting an exhaustive internal audit.
• Improve corporate governance: Companies with solid corporate governance structures tend to fare significantly better during an IPO phase, as per a PwC study.
• Prepare for transparency: Going public means increased scrutiny from various stakeholders. The leadership team must cultivate a culture of transparency and accountability ahead of an IPO.
• Invest in an experienced team: Expertise matters. Hiring knowledgeable advisors, legal firms, and IPO consultants can prove pivotal in navigating this complex process.

Unique Insights

Harvard Business Review's analysis of the last decade's IPOs shows that following traditional norms and practices doesn't guarantee success. Modern businesses should consider unconventional paths such as Direct Listings or SPACs (Special Purpose Acquisition Company) as potential IPO alternatives. Such non-traditional methods have been championed by firms like Spotify and Slack with considerable success.

Key Principles

1. Planning: A successful IPO is a result of detailed, strategic planning that starts at least 2-3 years before contemplating the IPO.
2. Sustainability: Investors are increasingly focused on companies' Environmental, Social, and Governance (ESG) performance. Creating a sustainable business model is no longer a choice; it is imperative before an IPO.
3. Value creation: Companies that consistently create value for stakeholders are more likely to achieve a successful IPO, asserts a report from the MIT Sloan Management Review.

Whether a company's IPO is a success or failure hinges on many swinging factors ranging from the Strategic Planning executed in the run-up, to the prevailing market conditions during the launch. This watershed moment can alter the course of a company's existence, catapulting it to new heights or challenging its very survival. Ultimately, an IPO should be approached as a strategic tool to propel a company's long-term goals and aspirations.