Here’s how we see it: CFOs can build the operating foundation needed for an IPO now, then go public when the time is right for their business.
Maybe that time is coming soon for you, since the initial public offering (IPO) market in the US is showing signs of waking up. There were 30% more IPOs in the first half of 2024 compared to the first half of 2023, according to EY’s 2024 IPO Market Trends report. The same EY report found that proceeds in 2024 had increased 83% compared to the same time frame in 2023, buoyed by a number of jumbo deals raising over $500 million.
However, investors are not quite ready to forget the hard-learned lessons of IPOs past. Instead of the “grow-at-all costs” approach of the last decade, investors this year are favoring companies with an established track record, considerable scale, and profitability. IPO aspirants need to have the fundamentals—including the right team, equity story, and technology—in place so they can seize market windows.
IPO preparation isn’t reserved solely for companies planning to go public in the near future. The most successful IPOs are launched by companies that operate as if they were public well in advance of their actual offering. For companies considering the public markets, here are seven strategies to prepare:
- Carefully evaluate the decision to go public: It is integral for CFOs to lead a thorough assessment of their companies and the motivation to go public. Not all businesses are suited for life in the public eye.
- Start early: Successful IPOs usually require are usually launched 18 to 36 months of preparation in advance of the offering, with the average time being 24 months, according to Deloitte. This gives your team time to build out needed capabilities and execute a smooth transition into the public domain.
- Get the right team in place: One common pitfall in the IPO process is under-resourced finance and accounting teams. Many organizations overestimate their teams’ ability to handle the volume and technical complexity of preparing for an IPO in addition to their regular workflow—not to mention the significantly increased workload post-IPO. And with the CFO busy handling the IPO process, a strong controller is essential for handling the day to day.
- Anticipate regulations and requirements: Going public means greater transparency and disclosure requirements, particularly when it comes to financial and other regulatory reporting. To prepare for these compliance requirements, finance leaders should early on assess key systems and processes and address any gaps between their current state and the level of performance that will be required by shareholders and the SEC.
- Build a persuasive equity story: In a 2024 McKinsey survey of global institutional investors, respondents cited an unattractive equity story as the greatest risk to an IPO, with 73% ranking it as a high risk, and the remaining 27% ranking it as a medium risk.
Your equity story provides the reason investors should buy the stock. CFOs should combine qualitative and quantitative elements, such as company performance, business model, market information, and growth strategy, into a compelling tale.
- Invest in investor relations: During the IPO process, CFOs and CEOs become the public faces of their firms. The IPO roadshow is a golden opportunity to attract the right investors in your target capital pools. A smooth investor roadshow and a smooth IPO are inextricably linked so be sure to practice your presentation, be prepared for a tough Q&A, and think like an investor throughout the process.
- Get the right technology stack in place: The successful transition of a company from private to public relies on a strong foundation of systems, processes, and technology. The obligations of a public company require a tech stack that facilitates the rapid production of accurate financial statements and disclosures, strong data governance and cybersecurity, and a robust set of internal and enterprise-level controls. The company also needs finance automation that helps it meet these expanded financial responsibilities without hiring an army of finance and accounting professionals.
Want to learn more about preparing for an IPO? Download the full business guide here.
About Oracle NetSuite
NetSuite has everything you need to grow, all in one place.
The company supports over 36,000 customers in 217 countries and territories around the world. As the world’s first cloud company, NetSuite provides a full, cloud-based ERP suite, including financials, inventory management, HR, professional services automation and omnichannel commerce modules.
