12 March, 2023

Taking a company public is a significant milestone for business owners and investors. Going public allows a company to raise capital, increase its visibility, and provide liquidity for its shareholders.

The process of going public is challenging. For most companies, preparation and filing takes 18 months and costs around $750,000. As a result, more than half of the companies that start the IPO process abandon it and remain private.

However, even companies that decide to remain private benefit from the deep-dive due diligence examination of their operations and market competitive analysis - as long as their efforts remain confidential. Startups and growing companies are targets for hackers, which can be cybercriminals or competitors.

To ensure confidentiality, the best first step is to invest in a virtual data room (VDR). A VDR is an ultra-secure online platform to store and share confidential documents. Once an authorized user enters the VDR environment, he or she can securely access and share documents, and work together on developing the due diligence report and regulatory filings.

ShareVault has been the VDR of choice for more than $50 billion in financial transactions, including IPOs. Based on that experience, ShareVault provides seven of the best practices for taking a business public.

1. Conduct a Thorough Evaluation of Your Company's Readiness

Before going public, conduct a comprehensive evaluation of your company's readiness: the due diligence process. Due diligence entails:

  • Three to five years of financials performance reports, including annual reports, tax filings, profit and loss statements, the general ledger, accounts payable statements, a schedule of the latest accounts receivable, Articles of Incorporation and bylaws
  • Names of board members and shareholders and an organizational chart
  • Records for partnership agreements, vendor and supplier relationships, and agreements to purchase securities
  • Inventory and assessment of physical assets, including real estate, manufacturing equipment, office equipment and supplies, inventory, and raw materials

In addition to these accounting records and corporate documents, due diligence will present how a company fits within its industry vertical and compares to its competition. The due diligence brief will also outline avenues for growth, as well as significant challenges or risks.

Amassing all the necessary documents and providing expert analysis is a highly collaborative endeavor. Clearly, a due diligence process without the security protections of a virtual data room is risky. ShareVault provides those protections - and also provides organizing software called the Due Diligence Checklist that sets up folders and the user authorization permissioning process.

While the due diligence process is challenging, its detailed, data-driven evaluation of a company’s strengths and performance will improve investor confidence in its readiness to go public. This can help increase the likelihood of a successful IPO and attract more investors.

2. Build a Strong Management Team

A solid management team is key to a company's success, particularly when going public. Investors will evaluate the company's financial performance and the management team’s experience and track record.

A strong management team can also communicate effectively with stakeholders, including investors, employees, and customers. Clear and transparent communication can help build trust and credibility with stakeholders. A skilled management team strengthens relationships and makes the process of going public smoother.

3. Develop a Compelling Business Plan and Investment Thesis

A well-crafted business plan and investment thesis help attract investors and generate interest in your company's IPO. This includes articulating your company's competitive advantages, growth prospects, and market opportunities. A compelling investment thesis should also outline the potential return on investment for shareholders.

The company can invite investors and other stakeholders to view these documents by adding them to the list of authorized VDR users. The VDR administrator can limit what documents are viewed, with time limits on viewing.

4. Compliance with Regulatory Requirements

Going public involves complying with various regulatory requirements, including securities laws, accounting standards, and reporting obligations. This includes preparing financial statements under Generally Accepted Accounting Principles (GAAP), adhering to securities laws, and establishing adequate internal controls and governance policies.

As part of the due diligence process, provide access to the VDR for experienced legal and accounting professionals and regulatory experts, who will verify that your company meets all necessary compliance standards.

When the time is right, you can provide access to archived documents amassed during due diligence to regulatory officials. Regulators may also demand an activity audit; ShareVault’s user activity monitoring tool can generate an audit report with a click.

5. Build Relationships with Key Stakeholders

Building strong relationships with key stakeholders, including investors, analysts, and media outlets, is key to generating interest in your IPO and sustaining long-term growth. This includes developing a strong investor relations strategy that effectively communicates your company's value proposition, growth strategy, and financial performance. Building relationships with media outlets and industry analysts can also help increase your company's visibility and enhance its reputation in the marketplace.

6. Plan for a Successful IPO Launch

A successful IPO launch requires careful planning and execution to generate maximum investor interest and achieve a positive outcome. This includes selecting established underwriters and investment banks, setting a realistic IPO price that reflects your company's valuation, and effectively marketing your IPO to potential investors.

Underwriters help a company to price its shares correctly, market the offering to potential investors, and facilitate the offering process. A company should select underwriters with a good track record of successful IPO launches in similar industries. Prepare for the post-IPO transition period by verifying your company has the necessary resources and infrastructure to operate as a publicly-traded company.

7. Focus on Long-Term Growth and Value Creation

Maintain a focus on long-term growth and value creation for your shareholders. This includes developing a clear growth strategy, strategically investing in your business, and continuously improving your operations and financial performance. Establish effective governance policies and maintain open communication with your shareholders. This helps your company meet its obligations and drives long-term value creation.

Long-term growth and value creation help attract and retain long-term investors who seek to invest in companies with sustainable business models and growth potential. These investors can provide stability and support to a company's share price and help it weather market volatility and economic downturns.

Get a Virtual Data Room with ShareVault Today!

ShareVault is the most feature-complete virtual data room solution available. ShareVault’s advanced built-in tools and features speed up your key business processes while keeping you in control of your information. With the help of ShareVault, you can protect your sensitive documents and keep access limited to authorized users only.

Each company planning an IPO has a unique value proposition and operating philosophy. That’s why ShareVault provides unique VDR features and a customized pricing model. To get a customized ShareVault proposal, contact us today!