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Tuesday, November 1, 2011

IPO Readiness: Why Now?


Getting your company ready for an IPO isn't easy, nor is it cheap; in fact, it's disruptive and takes people out of their comfort zones. But that's exactly why you should consider preparing for the IPO well in advance, say CFOs who have been through the process.

Our experts agree. "The IPO exercise is as much about unleashing the full potential of your company as it is about capital formation," says Armanino’s Consulting Partner David Davis. "The result of the IPO readiness process is a business that is better ma

He says that getting ready for an IPO touches every part of an enterprise, from filling out your Form S-1, to organizing a Board of Directors. "Achieving compliance with SOX alone is important for the financial organization in any company because it helps to optimize controls that lower the risk of fraud and malfeasance."

For most companies, getting ready for an IPO takes between six to eighteen months, notes Armanino Partner and Chief Operating Officer, Matt Armanino. He says it's a thorough process that begins with assembling a team of accountants, attorneys, investor relations professionals and your own internal team to take you public. Then it's building and refining your business processes and infrastructure; establishing a proper governance structure; and filing your S-1 with the Securities and Exchange Commission.

While Matt acknowledges that current financial conditions have slowed IPO activity, the benefits of starting the IPO readiness process in a pragmatic way is a good business practice. "The payoff is in savings from increased operational efficiency, higher security, greater accuracy, and just having a very clear, institutionalized process which is required of public companies," he says.

Of course, the IPO process is not completely pro forma. There is a need to customize some aspects for the process for companies in different business categories. For instance, technology or cloud companies that fulfill services such as technical training or new software updates over time need to keep in mind the rules for revenue recognition as they build their SOX compliant IT platforms so as not to run afoul of regulators on the issue of revenue recognition.

For CFOs, leading a successful IPO process, whether or not you go public, is a strong positive. "Because IPO readiness requires effort from nearly the entire organization, the CFO who leads it receives higher visibility within their organization and can leverage a successful readiness process to increase the trust of the CEO, executive team and board as a result," says David Davis.

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