Preparing for an IPO involves various aspects of resources, knowledge and expertise, of which many pre-public companies fall short. Further exacerbating the situation, these challenges often come with a tight or accelerating deadline for going public as well as the need to prioritize and manage multiple requests from outside counsel, underwriters and external auditors.
How does an entity prioritize and effectively manage the various IPO readiness tasks? How do you know your project plan is comprehensive and what to watch for as common pitfalls or road blocks?
Challenges and Opportunities
Companies that attempt to add IPO project management responsibilities onto existing accounting/finance teams, who most likely are already stretched thin, run the risk of delays in task completion, issues resolution, and ultimately in filing the registration statement.
In order to manage tasks and coordinate with various parties to achieve a successful initial public offering, companies will benefit from establishing a Program Management Office (PMO) with the right experience and skill sets.
Our Point of View
Establishing a PMO to manage all pre-IPO activities is a critical component to the overall IPO process.
Role No.1 – Advisor/Thought Leader:
A seasoned IPO Project Management Office bridges the gap between the known and the unknown in the development/refinement of the project plan. On the surface, completing and submitting an application to list on a particular exchange seems finite and straightforward; however, there are many steps involved when pulling together all of the required information. The PMO will help define the activities that make up the various workstreams and also build and ensure that timelines are realistic and aligned amongst all parties involved (refer to 1.1 for an illustrative action plan).
The PMO will also identify key risks that may impact an entity’s ability to meet all of the requirements of a public company and will advise management on appropriate remediation required.
Role No. 2 – Project Manager:
In this role, the PMO oversees project activities at both a holistic and detailed level. The PMO creates a status tracking and reporting mechanism to highlight key deliverables, due dates, responsible parties, project risks and project status. This allows for potential issues to be surfaced and addressed in a timely and effective manner.
Further, the PMO facilitates regular status meetings as there are many moving parts that need to be managed and completed in parallel.
Role No. 3 – Key Point of Contact:
During the IPO readiness process, there are numerous advisors involved, including the external auditors, the SEC (including its legal counsel), valuation firms, and underwriters and their counsel. The PMO can play a vital role in helping to coordinate and act as a liaison between the company and its outside advisors. By serving as the main point of integration, the PMO can effectively manage and route requests, follow up on any past due items and evaluate plans to keep or bring the project back on track.
Role No. 4 – Talent Scout:
The task of identifying and on-boarding appropriate resources can be time consuming for a company’s management team and often distracting from their main responsibilities. The PMO evaluates resource needs and staffs the engagement accordingly with the purpose of:
- Identifying the need for resources to complement the organization’s existing management team (i.e., Finance, IT, HR, Legal)
- Staffing technically competent resources that are knowledgeable and have hands-on experience in accounting and SEC reporting requirements
- Finding the right expertise in areas such as IT and Legal, where critical issues need to be addressed pre-IPO
Throughout the engagement, the PMO will continuously evaluate staffing needs and add or remove resources as necessary to ensure a cost-effective and successful project.
Role No. 5 – Knowledge Transfer:
Throughout the project, training, template creation and process standardization phases, and new policies and procedures are implemented and become integral parts of the company’s preand postIPO processes.
Companies anticipating a public offering often underestimate the magnitude of the required effort and fail to prepare for the possible effects on their infrastructure. They also often face a higher-than-normal risk of not complying with Section 404 of Sarbanes-Oxley. Without proper planning, companies frequently waste time and money focusing too narrowly on compliance projects only. The role of the IPO PMO is about managing the bigger picture, focusing the team in the right direction, and anticipating issues/risks to ensure that the IPO process is optimized.
How We Help Companies Succeed
We help pre-IPO and newly public companies establish scalable, sustainable processes to support their growth objectives. Our approach assesses a company’s ability to operate effectively and efficiently as a public company, including its overall ability to produce accurate financial filings on a timely basis, the scalability and efficiency of its IT operations, and its compliance with the various aspects of Sarbanes-Oxley and other applicable listing requirements.
Retail Company – Protiviti was engaged to assess the readiness of an organization for a public offering. As part of the assessment, a PMO function was established to manage and report upon the various workstreams.
The PMO quickly created a project plan that identified key tasks, responsible parties, timelines and project status. A communication plan was developed and weekly status meetings occurred with senior management. As a result of Protiviti’s assistance, our client was able to file the initial draft of its S-1 registration statement within 45 days of starting our IPO assessment.