For many business founders and leaders, an IPO is regarded as both one of the most gruelling and rewarding journeys one can embark on throughout their career. Yet little is known about the ins and outs of the experience itself as seen from their side of the table, nor how best to minimise the toil and maximise the return. The process is somewhat of a ‘black box’ resulting in apprehension about taking the ‘plunge’, even if the business and the team are well prepared. Or, conversely, teams diving in without fully understanding what they’re getting themselves into.
The themes outlined below represent an attempt to demystify some of the most pertinent aspects of the IPO process that ‘no one ever told you about’. It’s tailored to the experience of the individual versus the corporate machinations that can be found in the ‘prep’ documents. In some sections, I have tried to overlay some practical ‘tips & tricks’ that can, from experience, reduce the likelihood of it being more difficult than it needs to be for you and your team, and increase the likelihood of a successful outcome for all.
The experience will be defined by the humans you choose to surround yourself with. While you could argue that this may be universally true, it is especially acute through an IPO. Why? The process is characterised by a series of immovable deadlines, rolling global travel, endless document drafting (by committee), innumerable stakeholders, heady legal implications, and large sums of money. This array is then condensed into a short window of time and scrutinised by the press. Don’t forget, on top of this, you’re also trying to run your business.
Therefore, the most important thing you can get right is picking your starting line-up, person-by-person.
This is true for both your internal team members and external advisors. Internally, you should consider the members of management you choose to join you in the core IPO team (typically CFO, general counsel and potentially an investor relations or strategy professional), the board members on the Due Diligence Committee (DDC), and your key finance leaders (e.g. FP&A, financial control). Externally, the key ones to get right are your lawyers, investment bankers, investigative accountants, and public relations agency. Don’t underestimate the amount of work and the responsibility that the lawyers bear, in particular.
Whilst I’ve seen a handful of attempts at applying science to the advisor selection process, I feel strongly about basing your decision on the trust you have in the individual people who will be in the room with you late at night when problems inevitably arise. Obviously consider more technical aspects of the selection, such as fees, reputation/expertise and coverage, but base your final call on the individuals who are assigned to the day-to-day work. This means vetting the junior members of the team just as much as the most senior.
Tip: Consider supplementing your internal team with hired help – particularly amongst the finance teams where a lot of the heavy lifting gets done. There are freelance experts who ‘do’ IPOs for a living (i.e. gluttons for punishment!). They may lack company context but, in addition to the experience they can bring to bear, they also benefit from not being burdened by the day-to-day operational distractions.
Given the enormity of an IPO and the baggage that comes with it, it can overwhelm, sweeping up more people and head space than it needs to. To avoid distracting the business and derailing performance (in a year you need quite the opposite), in the early stages choose a small project team that will form the nucleus of your internal efforts. Set up a frequent and regular cadence for meeting throughout the process (I recommend daily). Rely on one of these people to track typical project variables: timelines, milestones, risks, actions, issues and decisions.
Outside of this internal mechanic, you will have external Project Management Office and DDC processes. These are indispensable. However, the process is more effective when supplemented with your own internal rigour. A lot of the tasks will fall on your people and the important internal minutiae might be missed at the external program level. It also enables you to keep other stakeholders ‘honest’ by having your own source of truth. For example, when external deadlines, decisions or risks shift unknowingly, you have your own trusted record.
Ensure you communicate clearly with the broader team that this internal unit will be accountable for delivering the project. The perceived glamour and inherent corporate goodwill will attract aspiring contributors. Including them isn’t always possible or productive; excluding them can create resentment. It’s important they understand that the most valuable contribution they can make is through continuing to run the business whilst you necessarily have your attention elsewhere.
Regardless of how committed external advisors may be to your business, fundamentally, they cannot be a substitute for the context and depth of knowledge you have of your own business. Their expertise here arises in the form of shaping the ‘equity story’, moulding it to reflect the prevailing interests and concerns of potential investors. Therefore, write the first skeleton version of your ‘pathfinder’ prospectus and management presentation. It will likely save a lot of ‘back and forth’ time. If you’ve prepared adequately, this should flow naturally from a pre-existing long-term strategy document. Supporting ‘situation analysis’ documentation can also be reshaped into an ‘industry overview’.
Other useful learnings:
When going through the process, the pace and intensity of execution can numb you to the moments that really matter. Worse, you can be physically far below your best at times that your mental faculties and attitude can make or break the whole deal. The most significant of these moments are the two roadshows (‘non-deal’ and management).
The non-deal roadshow
I believe this is the most important chance you have to have an outsized impact on the likelihood of a successful IPO. Assuming you have a good business and the bankers have done their job well, you have an hour with each of the 70-100 most influential investors globally to present your business. This arrives roughly six weeks into the four-to-six month process, during the finalisation of remuneration structures, governance documents and pro forma financials.
The significance of this 7-10 day global roadshow can be lost amongst the noise.
The non-deal roadshow overshadows the management roadshow in significance (and hardship) for two key reasons:
Therefore, the following tips can help place you in better stead:
The management roadshow
Given investors’ exposure to the first roadshow and prospectus material, the management roadshow is mercifully more Q&A-based, the novelty of which provides some relief. Nevertheless, the management roadshow also coincides with the official lodgement of the prospectus, which can introduce its own challenges.
You must ensure that the right stakeholders are treated appropriately in the design of the IPO itself and through the specific allotment of shares. This applies equally to stakeholders buying or selling. Unavoidably, you end up following a rather formulaic listing process and structure. This results in constructing shareholder ‘offers’ the way many others have done before you, rather than what is right for your business. Remember, not everyone shares the same incentives. Be mindful of this and stick to your guns – your advisors may come and go, but by championing your most important stakeholders, you will set the business and listing up for success well beyond the moment you are ringing the bell.
In our experience, the three most important stakeholders are:
Some practical tips:
I am now fortunate enough to have sat on both sides of the fence. I have deep empathy for the IPO roadshow experience, and so with that in mind a quick ‘cheat sheet’ for investors meeting management teams during a roadshow: