Top 10 Things You Must Accomplish in the Year Before the IPO
Preparing for an initial public offering can be a daunting task. Once the process kicks off, the wheels spin faster and faster, with deadlines and opinions flying around from everyone involved. What can ease the burden and streamline the process?
Collectively, our team has helped hundreds of companies prepare for their IPOs, and seen the best and worst of what can happen during the process. We consider the year before the transaction critical and recommend these 10 must-do steps.
1. Meet with the leading sell-side analysts in your space. Establishing relationships with sell-side analysts and keeping them current on your story will help them properly frame your company in discussions with institutional contacts. Additionally, well-informed analysts can keep your company relevant within the information flow inside the industry.
2. Meet with the buy-side thought leaders in your space. Whether these meetings take place at conferences or in buy-side analysts’ offices, it’s crucial to meet the folks who may one day own your stock. Reach out to and schedule meetings with the leading institutional accounts in each region of the country. Keep your conversations with the buy side more of an open dialogue, not a one-sided presentation, and conclude your meetings by asking for feedback on your story.
At this point, buy-side analysts have no vested interest and can be 100 percent honest and straight-forward about any holes in your story, underemphasized investment themes, and your competition.
3. Get to know the bankers. Participating in multiple discussions with potential bankers before making your selection will allow you to better assess each firm’s capabilities and select the ones that will best help you achieve a successful IPO.
4. Finalize your financials. Prepare fully audited financials for the past three years. This process should be finalized prior to beginning the IPO process, as changes to your historical numbers during the IPO process can hurt your credibility.
5. Stress-test your financial projections. The underlying assumption used in your forward looking projections should be well founded, logical and verifiable. Analysts and investors will begin to build their financial models based on those metrics, which should lead them to a forecast similar to your own.
6. Round-out the board. Qualified board members are highly sought after and will take longer to bring to your team than you may anticipate. When compiling your board, make sure your committee chairs have the appropriate expertise, and start pulling together the right members sooner rather than later.
7. Fortify the management team. The public markets are much more rigorous and scrutinizing than your management team may be used to facing. Ensure that your senior team is complete and prepared. In addition, you may need to bolster your financial reporting department, as it is an important part of life as a public company.
8. Determine guidance metrics. Begin to think about what metrics you will provide to assist analysts in building and forecasting their models (the number of physicians, customers, devices, prescriptions, sales people, sales quota, etc.). A good starting place is to evaluate the metrics that your public company peers provide. In a perfect world, you would be at least, if not more, transparent than they are with the Street.
9. Select a Wall Street communications team. As Wall Street tries to get up to speed on your company, they will call various executives in the company to pepper them with questions. (We have seen buy-side accounts call salespeople to gauge the pipeline, backlog or overall health of the business). It’s important to identify the executives (usually 2-4 people) who will interact with the Street. Consistency of message is essential to avoid causing confusion. Those individuals should also be well versed in Reg-FD to ensure you won’t have any problems with the disclosure of material non-public information.
10. Create your corporate presentation for the Street. Investors and analysts digest information in a certain way. By crafting your story into a Wall Street friendly format, the audience will get to that “Aha!” moment sooner.
Are you contemplating an IPO? Westwicke can help. We work with private clients and their banking teams to make the IPO process smooth and ensure our clients’ best interest and long-term credibility with the Street. Since our inception in 2006, we’ve helped 32 private healthcare companies prepare for their IPOs. To start the conversation, contact Westwicke today.
Bob East co-founded Westwicke is 2006. Since then, Bob has managed the firm’s strategic direction and led Westwicke's healthcare services and HCIT practice. He has worked with companies representing all aspects of the healthcare services spectrum. Bob received a BA in finance from Loyola College in Baltimore.
Tags: initial public offering, ipo, pre-ipo, wall street
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