Going Public? Five Things for the CEO and Board to Address

As the IPO climate remains positive, what do the CEO and board need to address to enhance public company readiness? We offer five suggestions.

1. Thoughtfully consider the business case for going public long before starting the journey. Also, develop a strategic plan which your team can execute to be properly prepared. Going public certainly has its advantages—liquidity, returns for investors and employees, and a true valuation for the business for owners who desire to monetize their company. Like all good things, becoming a public company has its price—costly and time-consuming reporting, less time to run the business, a shorter-term orientation as the market determines your valuation, and increased attention on the associated reputation and other risks of being public.

2. Don’t underestimate the level of effort, wear and tear on your people, and potential disruption to your business that an IPO requires. Effective financial systems and robust internal controls all are necessary to get ready for prime time. So is an efficient period-end financial close (at least seven to 10 business days) and a scalable IT environment.

3. Start acting like a public company before you have to for real. For example, give the financial close and earnings release exercise several dry runs. In regulated environments, a strong corporate governance process and control environment are critical to compliance with Sarbanes-Oxley, exchange listing standards and applicable industry regulations. Assemble a superb team to get the pieces in place, including treasury, legal and internal audit. Develop a public company consciousness among employees to initiate the discipline.

4. Make sure you have a “market facing” CFO who can effectively manage the IPO process. He/she should be able to handle the follow-on activities with analysts, underwriters, investors and other external stakeholders. A “been there, done that” CFO can help manage the distraction of the registration statement process, organize “road show” presentations, and effectively manage the critical ongoing quarterly and annual reporting requirements once the IPO goes effective. Also, the CFO must ensure there is a reliable business forecasting process and manage investor/analyst expectations appropriately.

5. Surround yourself with experienced people. This includes board members, legal counsel and external trusted business advisors who understand the dynamics of transforming to a public company. Tap into their experience to deal with the legal and regulatory hurdles to going public. Agree on the issues the CEO and board collectively must address in preparing the company, including actions each must take. For example, it is common for boards of pre-IPO companies to address independence and composition requirements, form the necessary committees (e.g., nominating, audit and compensation), organize for risk oversight, define matters requiring board approval, approve the compensation structure, and ensure an effective tone at the top, among other things.

In summary, we’ve provided suggestions around readiness. Yes, pricing an IPO is important, but getting ready for prime time and having a well-planned positioning and communication strategy in place are vital prerequisites for maximizing the value of going public.

Joseph Tarantino is president and CEO of Protiviti, a global consulting firm (www.protiviti.com). He has more than 27 years of experience working with a variety of organizations to enhance their business performance through risk management, operational effectiveness and enhanced governance. In 2014, Tarantino was named one of National Law Journal’s 50 GRC Trailblazers and Pioneers.

Steve Hobbs is the global leader of Protiviti’s Public Company Transformation practice. Hobbs has more than 30 years of experience providing business consulting and financial reporting services to clients in numerous industries, primarily technology and consumer products companies.