An initial public offering (IPO) is a huge event in the life of any company. For many, it will be the most significant transaction they ever complete. At its core, it is a trade-off. It opens the door to the capital markets with their myriad benefits, but it also brings accountability for the sponsors and directors to their new fellow investors, which in turn transforms governance and transparency.
Success is achieved when expectations are met. An IPO is an undertaking with an extensive cast of characters and their successful coordination through the process can be a complex undertaking. But there are only three central parties who will be there both for the IPO and what follows: sponsors, directors and investors.
For sponsors, an IPO will be about developing their company to the next stage. Raising new capital for investment, attracting and incentivising the best talent, and establishing a liquid currency for the future. For them, valuation at IPO and a healthy aftermarket with a steady appreciation in the value of the shares as the company develops will be key.
THE SECRET GUIDE TO IPOs
Download your copy of the guide today
For the directors, who are the stewards of the company’s interests, come the obligations of running the business for all their shareholders, delivering on the strategic vision that has been promised while introducing and maintaining public company standards of governance.
Investors will be seeking a return. They’ll be exploring the company to understand what it is, how it came to be and what it aspires to become – as well as how realistic those ambitions are, and the credibility and trustworthiness of the sponsors and the directors as agents to deliver that vision. For them, it is a question of belief.
Ultimately, a successful IPO is one that concludes with a happy consensus on valuation (or perhaps a healthy degree of mutual dissatisfaction) and one in which new funds are raised in sufficient volume to enable the company to develop.
And what is the best way to ensure this outcome? Clear transparent dialogue with advisors and investors who can help to set expectations in a realistic way with regard to the process, the costs, the risks, valuation, volume and life after the event.