Once a company decides to go public, it faces far-reaching changes. It has to master many challenges and obstacles on the road to an initial public offering (IPO). Once the company has gone public, life as a publicly traded company is not always easy – this makes it all the more important for this step to be well prepared.
An IPO is often the most important transaction in the history of a company. Successfully designed and planned in good time, an IPO offers the company a great opportunity to attract new investors and raise additional capital. At the same time, it also poses a variety of challenges for a company. Any company planning an IPO should ask themselves: what does it mean to act as a publicly traded company on the market? What kind of schedule is realistic for this transaction and can this complex transaction be negotiated without compromising business operations?
Actively tackling these challenges is absolutely decisive for the success of the IPO and investor confidence. The right preparation at an early stage is therefore the criterion that defines the success or failure of an IPO.
The route to the stock exchange requires the utmost degree of planning and the coordination of numerous components. A potential issuer can best avoid unpleasant surprises by identifying potential problems in terms of organisation and corporate structure in advance, and ruling out risks such as delays or interruptions to the process or the loss of investor confidence – in short: anything that could impact on the perceived value of a company – through professional preparation at an early stage. Experience shows that delays in problem-solving and unforeseen issues are the biggest obstacles to a successful IPO. This can lead to increasing transaction costs, loss of reputation, a lower realisable market price, postponement and, in the worst case, cancellation of the IPO. For this reason, the main choices for a successful IPO should be made before the actual IPO.
Preparing for a successful IPO normally takes a period of one to two years. The company needs to identify and resolve the main challenges internally and externally at an early stage. For example, the company needs to identify and select the right capital market and the right team of consultants, assess the impact of adhering to post-listing obligations and introduce appropriate project management processes and change management structures. On top of operational activities, this involves creating a prospectus in compliance with the EC Prospectus Directive, performing due diligence, undertaking a market valuation for the purpose of determining the price, and putting together a roadshow with marketing material for potential investors. All these points are crucial to gaining investor confidence. These tasks are multiplied if foreign investors are to be addressed in addition to the German market.
How can BDO support you in your preparations?
We have two objectives at BDO. Our first objective is to identify potential issues in the field of organisation and corporate structure, and offer solutions before the actual IPO. Our second objective is to help the company to maximise its company value by properly planning the IPO process, preparing the company for life as a listed company and minimising the risk of company’s value suffering due to process delays, interruptions or loss of confidence.
Our services reflect our approach: the route to the stock exchange needs to be well planned from the outset. We at BDO help you to find the right path and to achieve your goals.