Leading your company to a successful liquidity outcome presents many issues, ranging from investor and advisor relations to organizational team building. To manage and maintain operational readiness for this event, there are a variety of factors and steps to take.
In September 2015 our NYC CFO Leadership Council kicked off its new season with a presentation on Preparing for a Liquidity Event: Best Practices for the Best Outcome. This panel discussion focused on the role and expectation of CFOs in preparation for an IPO, capital raise, and acquisition.
Our Speakers Included:
Connecting With The Right Advisors Is Crucial
Finding advisors is all about building solid relationships with those who are in tune to the nature of your company. In selecting appropriate ones, it is important to take into consideration your company size and transaction type while evaluating how bankers, accountants, and attorneys can serve you in the process.
Our panelists offered the following advice based on their own experiences:
- When working with bankers, it is important to look beyond those who are simply transaction-oriented, and find the ones who fully understand your company business and strategy and have investor contacts best suited to your needs. Bankers should be able to pull in the best investors for you at the right price. Also, a bit of creativity can go a long way, especially when it involves tailoring an investor pitch, rather than simply regurgitating a corporate message.
- Panelists also noted that, in some cases, venture capital backed companies continue to successfully rely on their own boards as advisors rather than building banker relations.
- Attorneys can provide a more objective change of pace and can be very resourceful in helping you to understand boundaries that can be pushed without offending your buyer, as well as the consequences of your actions. They play a key role in negotiating and getting a deal done.
Keep Your Investor Base and Business Plan Energized
When choosing the right investors at pre and post IPO stages, our panel recommended the following:
- Hold “test the water” meetings with initial investors. Once you see what kind of questions arise from these, you can fine tune your business plan.
- Don’t be overly selective in the beginning, as the main objective is filling your book. Then, once you’re in the capital market, there will be many changes and different options and you can be more particular.
- Because you are constantly meeting new investors and it is inevitable that you will lose some along the way, you must keep your base fresh. For successful and continued growth of your company, investor names play a significant role.
- Make sure your board has a mix of preferred and common shareholders.
- You should have a current business plan that can prove the validity and serve as an anchor for any offer prices.
- Make sure that all cohesive company information and an annually updated multi-year financial plan are in order.
Maintain A ‘Business As Usual’ Philosophy
Our panelists recommended limiting visibility of the liquidity process to the employee base, as only executives need to be aware of the company change. Employees can be briefed when the deal is done. In the meantime, though, you need to fully focus on the background and strengths of your executive team and provide them with up-to-date communication and information management training while setting achievable goals for post IPO performance.
It is also important to look at the comps for severance agreements and get as much equity as possible in the hiring process, at the lowest price point. Investors like to see CFOs with large stakes. Exercise equity as it vests versus waiting for an exit event.
You Are The Team Quarterback
As CFO, you must take ownership and lead this transaction process. To be successful, you must execute a strong team leadership style, as you drive and manage your CEO, your board, and your advisors. Utilize all of the skill sets that surround you. Establish rules of engagement with your CEO. Make sure that board members understand the financial impact of a deal. Establish a trusting relationship with your advisors. Incorporate a solid infrastructure to support a deal and delegate to team members as needed. Be respectful of colleagues, but be aware that tough decisions need to be made during the process. And, keep in mind that this process is all about execution and maximizing the value of your company. The business model must make sense. If not, it could lead to a fire sale.
For questions or more information, contact us today.