Prior to taking the decision to float, the Board should carefully review whether this is the most appropriate option for the company.
The advantages of an Initial Public Offering (IPO) include:
- Raising new money to enhance the business;
- Using marketable securities for acquisitions;
- Allowing existing shareholders to realise part of their investment;
- Creating share participation schemes with identifiable benefits; and
- Enhancing the profile and status of the company.
The disadvantages of an IPO include:
- Greater scrutiny and accountability;
- Increased ongoing costs as a public company;
- Limited marketability of shares (particularly for smaller companies);
- Costs of the IPO including the hidden cost of management time not devoted wholly to running the business; and
- Increased vulnerability to unwelcome takeover (if there is a large percentage of the company in public hands).
Directors should therefore consider their strategic plan for the company and whether an IPO represents the optimal route for this. To achieve a successful IPO investors will want a company to exhibit most of the following:
- An impressive management team with a broad base of skills. This will usually include a finance director or there should be the clear intention to appoint one at the appropriate time;
- Be in a favourable market sector;
- Have reasonable prospects for significant growth and usually a demonstrable track record; and
- A willingness to meet the demands put on public companies including the appointment of non-executive directors.
As a leading firm of accountants for IPOs on AIM and other Markets, with an experienced team of dedicated professionals focussed on growing companies, we can explain the process and provide objective advice in relation to an IPO. In addition to acting as Reporting Accountant, we can consider, with you, the various Equity Markets and introduce you to other professionals, who will be key to the success of the IPO, including Nominated Advisers (Nomads), stockbrokers and lawyers.
An IPO is an onerous task, demanding a significant commitment in time and energy from the directors. It is not a decision that should be taken lightly, and we would explain the process and ongoing commitment to you as part of the planning process in order to ensure that you are able to make an informed decision as to the right course of action for you and your business.
Reporting Accountant
The role of Reporting Accountant is key during the IPO process. It is therefore essential that those working on the assignment have experience of public companies and the requirements of the company’s other advisers and of the capital markets.
Throughout the IPO process our role goes far beyond producing investigative reports and comfort letters for directors of the company and sponsor or Nomad. The wealth of experience of our dedicated Public Company Team enables us to identify potential issues at an early stage and create solutions in order to work within the agreed IPO timetable.
Post-IPO we will be able to assist you by carrying out financial due diligence in relation to potential acquisitions.