An IPO can be a long process (3 to 6 months). The following 'top tips' can help smooth the process:
- A preliminary legal review of the company's key assets and liabilities (including, for example, tax liabilities) will help to establish that the company owns the assets to operate its business and is only responsible for liabilities associated with its business. The review should ensure that:
- constitutional documents are suitable
- appropriate contracts are in place with all material customers and suppliers etc and terms are not breached
- any IP which is important to the business is properly protected
- existing litigation is summarised
- pension schemes are adequately funded
- banking facilities are sufficient, and
- a document data room is available.
- Initial agreement of commercial terms with the investment bank such as warranty scope, indemnity limits and fees and commissions can simplify conclusion of the IPO placing agreement.
- Shareholders may be required to agree to limit when and how they will sell their shares and to enter into the placing agreement. We recommend early involvement of shareholders in those discussions.
- Reorganisation of the company or its share capital is usually required with existing rights extinguished. This can de-rail the IPO if not agreed early in the process.
- Verification of statements made in the IPO documents can be time consuming. Our 'top tip' is to collate the source materials during the drafting process rather than afterwards.
- Salary and benefits will usually be revised upon IPO with new service agreements and share incentive arrangements. Negotiation can be a distraction for management. We would recommend seeking external advice from a remuneration consultant.
- Structures to de-risk IPO execution (anchor/cornerstone orders) should be considered.
In conclusion, our number one 'top tip' is be prepared!