Advisory So You Want to Take the Ipo Road

8/3/2019 Advisory So You Want to Take the Ipo Road

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SECTORS AND THEMES

Title hereAdditional inormation in Univers

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kpmg.com

So you wantto take the IPO

road?kpmg.com

KPMG International


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o the KPMG network o independent rms are aliated with KPMG International. KPMG International provides no client services. All rights reserved.

TheIPOprocess can be

conusing and complex

2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member rms


3/20

Are you considering taking an IPO

journey? For many entrepreneurs and

private equity rms, an Initial PublicOering (IPO) is an objective in and o

itsel. For others, it oers a signicantopportunity or growth and public

awareness.

But getting to the IPO destination

and knowing what lies beyond can

be complicated and time consuming.There are no direct pathways. The only

path is the long and winding type. And

there will almost certainly be risks and

hazards along the way; signposts and

milestones to look out or; and a host osuppliers and gurus that can either help

you or hinder you.

Indeed, the IPO journey is not or

backpackers. It takes rigorous planning,

reliable strategies and a lot o hard work.

But or those intrepid travelers that can

get this part right, the IPO journey could

easily be the most rewarding adventure

a company can take.

ForewordAt KPMG, we know that the IPO process

can be conusing and complex or

rst-time travelers. That is why we havebrought together a global network o

our sharpest and most experienced IPOand Capital Market proessionals to help

guide you along the way. And having

successully steered hundreds o private

companies down the path to IPO and

beyond, we believe that we understand

how to plan the right roadmap to make

your journey a success.

Envisioning the journey

This guide and those that will

ollow will lay out some o thekey considerations, challenges and

opportunities that must be considered

by any executive preparing or a journey

to an IPO. Within these pages, we

provide actionable advice; valuable tipsand practical insights to help all types o

private companies make their journey a

success.

Well share our experience and pull back

the curtains on some o the commonpitalls and misconceptions about

planning and executing an IPO. Wellalso share industry best practices and

tips that we have learned along the way.

Developing a practical travel plan

We hope that this guide helps potential

IPO candidates to orm a clearer

picture o the journey that lies ahead o

them. And while there are certainly a

number o complexities that must be

considered, we are condent that

with the right guidance and support

travelers can avoid many o the hazards

on the road.

But a simple guide cannot cover all o

the technicalities and complexities that

are ound on the road to an IPO, and

so we strongly encourage potential

travelers to bring along an experienced

IPO proessional who can turn insight

into a tailored and comprehensiveroadmap.

Given our depth o experience

throughout our network o member

rms in more than 150 countries, weencourage you to contact KPMG to ndout how our proessionals can help your

company cut through the complexities

o an IPO and layout a sae travel plan to

help you reach your ultimate destination.

Manred Hannich

Global Leader

Global Head o Accounting

Advisory Services

Linda Main

Head o UK Capital

Markets Partner

2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member rms o the KPMG network o independent rms are aliated with KPMG International. KPMG International provides no client services. All rights reserved.


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2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member frms o the KPMG network o independent frms are afliated with KPMG International. KPMG International provides no client services. All rights reserved.


6/20


Is it time oran IPO?

The frst question youshould ask yoursel iswhere you want to go and more importantly why?

The simple truth is that going public

may not be the right strategy or every

company. The choice o destination will

ully depend on the objective you are trying

to reach and your reasons or heading out

on the journey in the rst place.

Depending on your companys objectives

and maturity, there might be a number

o why an IPO could be the right step or

your company. For example, IPOs can

enable private companies to:

Access new unding: companies

seeking to grow organically or

through M&A may consider going

public to access new sources o long-

term capital that can be reinvested

into the business.

Deliver value to existing investors:

by listing your companys equity on the

public market, existing stakeholders

are able to monetize their investment

and create a viable exit strategy.

Build market awareness: many

companies pursue an IPO in order tobuild their reputation and visibility in

local and oreign markets, particularly in

cases where the companys main ocus

o operations lies outside o major

markets and the developed economies.

Incentivize employees:corporate stock option programs

are a strong vehicle or driving

employee engagement and tying

compensation to the nancial

perormance o the company. Broaden the governance structure:

while there are a number o ways to

strengthen a companys governance,

IPOs provide a strong catalyst and

proven ramework or revitalizing the

governance structure.

And while these are some o the most

common reasons to set out on an IPO

journey, there may be a number o

other side benets that can be attained

through the process. For example,

companies operating in politically unstablejurisdictions or ones with opaque

regulatory protection may nd that listing

on a oreign exchange provides a level oprotection or their existing investors. In

other cases, an IPO may constitute a step

towards securing lucrative contracts that

are reserved or public companies.

The wisdom o lookingbeore you leap

There are, however, a number o

important draw-backs to going public

that may not always be obvious beore

starting the journey. Companies

considering the IPO process should beaware that their organization may meet

a number o signicant challenges

along the way, such as:

Time and resource requirements:

being a public company takes a loto hard work, not only to ensure a

successul IPO, but also to maintain

your listing and uphold your stock price.

In particular, most executives nd they

are challenged to devote the necessary

time to successully manage both the

IPO process and simultaneously serve

their core business.

Transparency and reporting: public

companies are obliged to report

their nancial statements and uture

strategy to investors and analysts,which is not only time consuming,

but may provide competitors with

valuable insight into proprietary

business plans and strategies.

Regulation and compliance:

publicly traded companies ace an

exponential increase in the level o

regulatory scrutiny and compliance

that must be met, and i oundnon compliant they may ace sti

penalties or suer rom depressed

share prices as a result.

With the proper planning and

guidance, most o these issues can bemitigated

2 | So you want to take the IPO road?


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There may be a

number o viablealternatives to anIPO

Cost: private companies will invariably

need to invest in their company in

order to create the right environment

within which to go public. In manycases, signicant investments may

be required to create and ormalize

processes to ensure compliance with

IFRS and other nancial reporting

requirements.

Defnition: IFRS

The International Financial

Reporting Standards (IFRS) are aset o accounting standards that

apply to publicly traded companies

in most major markets (with the

notable exception o the United

States).

With the proper planning and

guidance, each o these issues can be

mitigated. But or many executives

particularly entrepreneurs the

requirements, rigor and obligationso perorming as a public company

are oten underestimated. The reality

is that public companies are very

dierent rom private ones, and some

executives may quickly nd thatthe eort and risk may not always

outweigh the benets.

I not an IPO, then what?

It is entirely possible that an IPO may

not be the right path or your company in

the near uture. There may be a numbero viable alternatives that can be

explored to achieve similar objectives.

These include:

Accessing bond markets: bond

markets provide an avenue or private

companies to sell their debt on public

markets, but without many o the rigorsor regulation that come with an IPO.

Bank borrowing: companies may also

gain new nancing through traditional

loan and debt vehicles raised through

commercial banks. But given the tightcredit market that ollowed the recent

economic recession, bank nancing

may not always be available and can

be comparatively expensive or manycompanies.

Mergers and acquisitions: an

alternative method or monetizing

existing investors is to either sell the

company or merge with a competitor,

eectively buying out the existing

shareholders. However, this oten

results in a loss o control.

Defnition: Leveraged

Buy-Out (LBO)

An LBO (a.k.a. bootstrap)

occurs when an investor takes acontrolling stake in a company by

using the assets o the acquired

company as collateral. LBOs are

extremely risky or investors and

the acquired company.

Joint ventures: expansion into new

markets can also be accomplished

through joint ventures with other

companies that can provide access to

unding, technology or key markets.Oten, joint ventures are ounded

between equals who then work

together to pool their resources and

achieve a shared goal.

Defnition: Private Equity

Firm (PE)

Private Equity rms are

investment managers who

invest in companies through a

variety o investment strategies.

Private Equity rms oten provide

extensive business experienceand best practices to their

network o companies.

So you want to take the IPO road? | 3


Private Equity: securing aninvestment rom a Private Equity rm

is a common method or raising undswhile simultaneously maintaining

the condentiality o the business.

However, this route does not always

provide a clear exit strategy or existing

investors and may reduce the overall

visibility o the company in the market.

The highly leveraged structure typical

in a PE deal also brings increased risks.

Clearly, the rst step or any executive

considering an IPO is to dene theirdestination, motivation and approach

which, in turn, will orm the basis o their

corporate strategy going orward. And i

an IPO turns out to be the best solution,

executives who have completed this

important rst step will be better placed

to move ahead with a clear understandingo their opportunities, goals and

challenges. Many companies nd that the

detailed planning necessary rom an IPO

also brings benets i plans change and

an M&A deal is contemplated.


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Its going to be anexhausting andexhilarating trip.And youll never be

the same again.The journey to an IPO is not a weekendpleasure trip. It takes a lot o hard work,

planning and a substantial investment

o time and money beore you can start

down the road.

Indeed, any company considering an IPO

would be well advised to make sure theyare in proper shape to take the journey.

This involves conducting a thorough

pre-IPO readiness assessment that

compares critical processes and controlsto the standards required o a listed

company. And much like a visit to the

doctors oce, you may not always like

what you nd out.

A fnancial health-check

For many private companies, the

process o going public will necessitate

a undamental shit in nancial reportingand planning. For one, IPO candidates

will need to comply with the local

regulatory requirements or their

respective exchange. In the EU and a

number o other jurisdictions, this oten

requires companies to become IFRS

compliant, and in the US this means

compliance with both the ederal

SarbanesOxley Act, and local US GAAP

accounting practices.

But investors will also want to see a

history o strong nancial reporting.

So many companies will need to

retroactively re-analyze their past

nancial results to bring them intocompliance with the relevant accounting

ramework. Needless to say, this can be

Getting in shape

or the journey


a lengthy and resource intensive initiative

and may be dicult to manage in parallel

to the ongoing responsibilities o the

nance department.

The nance department itsel will also

require a undamental transormationas the company prepares to go public.

Financial reporting requires companies


Defnition: SarbanesOxley

Act (SOX)

The Act sets a ederal standard

or all US public company

boards, management and public

accounting rms and covers issues

such as auditor independence,corporate governance, internal

control assessment, and enhancednancial disclosure.


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to create and maintain strong processes and controls that

stand up to the rigors o compliance. It is also strongly advised

that the nance department be staed by proessionals with

experience reporting to capital markets.

The market will also expect to see a strong and detailed

nancial plan or the company, as well as robust orecastingand budgeting capabilities. Forecasting, in particular, will be

critical to the management team in the uture as they work to

deliver reliable earnings guidance as a public company.



Defnition: GAAP

The Generally Accepted Accounting Principles (GAAP)

reers to a standard ramework o guidelines or nancial

accounting that includes standards, conventions and

rules that accountants must ollow in the preparation onancial statements. However, the term GAAP reers

only to locally accepted rules, and so the category couldinclude IFRS or other local GAAP rules.

An IPO ftness test: Key diagnostic questions

Will we attract investors?

Canweprepareanattractiveequitystorywith

supporting evidence?

Dowehaveclearandcrediblegrowthopportunities?

Dowehavewell-denedKeyPerformanceIndicators?

Will we meet the requirements?

Isthereanappropriatetaxstructure?

Arewereadyfortheduediligencechallenge?

Dowehavearobust,stand-alonenancialtrackrecord

produced under IFRS or equivalent standards?

Can we produce high-quality fnancial inormation

on a timely basis?

Areweabletocomplywiththerulesforongoing

disclosure and transparency?

Canweproduceaccurateandcomprehensiveinormation or the board?

Arewereadyfortheadditionalscrutinyfromanewset

o stakeholders?

How do we measure up on corporate governance?

Dowehaverobustsystemsandinternalcontrols?

Areourriskmanagementprocessessufcient?

Havewethoughtaboutcorporatesocialresponsibility?

Isthereanalignmentofstaffremunerationto

perormance?

Isthereclearandtimelycommunicationwithkey

stakeholders?

Canweestablishanappropriateboardstructure?


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Keeping the executive team ft

For the management team, the process

o going and remaining public will

create new and oten overwhelmingdemands on their time. On its own,

the IPO process is massively time

consuming and key executives oten

nd they neglect the day-to-day needs

o the business as a result.

In act, in a recent survey conducted

or KPMG LLP (UK), 81 percent o

nancial directors and 62 percent o

chie executives who had recently

gone through an IPO admitted that they

had spent more than hal o their time

ocused on the IPO process (at a time

when, arguably, they needed to be more

involved in the business than ever).

And ollowing the IPO, key executives

will continue to nd themselves

acing new pressures and challenges.

Analyst road-shows, investor briengs,

Annual General Meetings (AMGs) and

shareholder inormation requests dont

only take up a signicant amount otime or these executives; they also

orce them into the limelight. Indeed,

many executives o privately-held

companies may not be ully prepared

or the level o scrutiny that comes withgoing public.

Analysts and shareholders will also

expect executives to have some prior

experience operating in capital markets.At the same time, the act o going

public requires a behavioral change

on the part o executives. Openness

and transparency are key aspects o

dealing with shareholders, and many

o the more entrepreneurial executives

may have to re-adjust to the idea o

having their plans scrutinized by theinvesting public.

81 percento nancial directors and 62 percento chie executives admitted thatthey had spent more than hal o theirtime ocused on the IPO process

The executive ftness test: Key diagnostic questions

Do you have the necessary time?

Canyouproperlyfulllthepre-IPOrequirementsandsimultaneously

maintain business operations?

Willyoubeabletospendupto20%ofyourtimeoninvestorrelationsafter

the IPO?

HowwillyouprioritizeIPOandday-to-dayoperations?

Are you up to the scrutiny?

Areyoucomfortablewithyourcompensationandothersensitive

inormation being disclosed?

Canyourespondappropriatelytoshareholderandinvestordemands?

Areyoupreparedtobetransparentandclearineverythingyoudivulge

to the market?




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2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member frms o the KPMG network o independent frms are afliated with KPMG International. KPMG International provides no client services. All rights reserved.

Plotting your roadmap

To be sure, there are a number o

massive complexities acing companies

undertaking the IPO process. Thegood news, however, is that with

proper planning and a clear roadmap,

companies can cut through the

complexity to a relatively straight-orward IPO path.

But it is not to be taken lightly. Having

conducted a pre-IPO readiness test,

many companies will fnd that they ace

many months o hard work beore they

can start the ormal process in earnest.

The simple truth is that there are no

shortcuts through the IPO process; and

executives should be wary o anyone

oering one.

And since the level o detail and rigorthat goes into the pre-IPO preparation

will have a direct impact on the eventual

valuation o your company, it is critical

that executives take the time to create aclear and reasonable roadmap.

Central to this process will be the

development o a clear equity story

that enhances the IPO candidates

negotiating position with investmentbanks and a clear understanding o the

depth and type o comparative fnancial

statements that may be needed to

support that. And or companies with

complex fnancial histories (or example,

resulting rom diverse geographical

scope or a history o mergers and

acquisitions), additional documentation

may be required, such as pro-orma or

carve-out fnancials.

To achieve this, executives will need to

rely on trusted advisors and partners;people who have traveled the road

beore and are aware o the hazards

that can get in the way. They will need

to adjust their perception o the IPO

process to create realistic expectations

about the level o eort, time and

experience that might be required.

And they will need to do some very

heavy liting to make sure they properly

execute their plan, even while thebusiness rapidly changes around them.

Defnition: Carve-out fnancial

statements

Carve-out statements are used to

separate the fnancial statements

o a particular division or business

unit to assist in the valuation

process. Carve-out statements are

also used in situations where onlya part o the organization is beinglisted on capital markets.


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Ready to start the journey? Watch out or some common hazards.

Now that you are ormally headingdown the path to an IPO, expectations

internally will be high. And why not?

Ater all, your employees know rst-

hand what a strong uture lays ahead or

your company. But there are a number

o areas where expectations can oten

get ahead o reality.

For instance, many executivesenter the IPO process with high

expectations or their initial valuation

which are oten not met. That is

because or investors valuation

will be based on a number o critical

actors, including some that are

outside o the companys control (suchas sudden fuctuations in the economy,

disappointing earnings rom peers,

or negative reviews rom analysts).

And since your company will be a

comparatively unknown entity to

the market, you may also expect to

see a discount added to their eventual

valuation to oset the perceived risk.

Valuation can also depend on the quality

o your advisors. Those with strong

experience and international networks, or

example, may be able to attract a widerscope o investors or be more aware o

existing investor biases. Those without,

however, may only accentuate the

problem by citing high valuations at the

start o the process and then continuously

downgrading their expectations as theday o IPO approaches.

O course, the price that a company

can etch or its shares is ultimately

constrained by the amount o money

available in the market. During the

nancial crisis, or example, a massive

amount o liquidity was removed rom

most o the major markets around the

world, seriously aecting the valuations

o the ew companies that conducted

an IPO during that period. And while

investors are once again starting to putmoney back into the market, there is

only a nite appetite or IPOs amongthe investor community, which may also

aect the initial valuation.

Travelers should note that keepingmomentum and employee engagement

through the IPO and post-IPO period

is key, and management will need to

make extra eorts to set and maintain

appropriate expectations within their

organization.

Hazards you

should avoid

Myth: A history o solid growth

is the most important

actor or attracting

investors

Fact: Your past history o growthis important or setting

precedent, but investors

want to know that the

company has more growth

opportunities ahead. A

critical part o the pre-IPO

process is writing yourequity story to demonstrate

your companys growth

potential and plans orthe uture.

Myth: All investors love an IPO

Fact: Only a certain segment

o the investing audience

is willing to take on theheightened risk o investing

in a company with no

public track record. True,

IPOs tend to gain the most

attention and generate the

most press coverage, but

this is not indicative o the

markets appetite or IPOs.

Myth: Dual listings net higher

valuations

Fact: Listing on two exchanges

oers a number oopportunities to public

companies such as access

to a broader range o

investors, enhanced public

awareness, tax benets

and even access to new

markets. However, dual

listings do not generallyimpact the valuation in any

direct way.




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Setting a manageable pace

The journey to a successul IPO is amarathon, not a sprint. Far too oten,

executives rush out o the gate towards

an IPO believing that by shear will o

spirit they can speed up the process.

But the IPO process takes time and

patience. It is a stepwise program that

makes incremental advances over a

period o time to saely and successully

achieve a goal.

So instead o setting a date or an IPO

and then rushing headlong towards it,

executives would be better served to

set a timetable or achieving steps in the

process instead, and then be prepared

to pull the trigger when all o the workstreams are completed. In this way,

managers can sharpen their ocus on

achieving the project plan rather than

xating on the looming horizon.

Setting an appropriate pace will also

be important or helping executives

balance the demands o the IPO

process against the needs o the

organization. Preparing or an IPO can

be a signicant change process, and

employees may need sucient time

to acclimatize to the behavioral change

that will be required. For instance, the

implementation o a new orecastingand budgeting processes may impact

a number o internal divisions such as

sales, IT and distribution, all o whom

will need to be trained on new systems

beore the IPO.

Indeed, there are two major pot-holes

that can trip up companies in the

immediate atermath o an IPO: missing

their rst earnings guidance to the

market and missing their rst nancial

reporting deadline. Both are symptoms

o excessive speed in the pre-IPO

process. On closer inspection, one oten

nds that most companies that stumble

in this regard have rushed through the

IPO process and either do not have the

proper systems and controls in place,or their sta is too inexperienced or

unprepared to meet the heightened

expectations o the market.

So while taking a measured pace may

be rustrating or many organizationseager to debut on the public markets,

travelers on the IPO road will ultimately

nd that their pace is directly related

to their ability to smoothly transition

through the IPO process and into

public lie.

Myth: The most important

step or US listings

is compliance with

SarbanesOxley Act

Fact: Sarbanes-Oxley complianceis certainly important or

any company seeking a

listing on US markets. But

there are a number o other

issues that are equally

important and complicated

to achieve. Appropriatenancial reporting

capabilities, or example,

or reliable systems andcontrols.

Myth: Listing on a oreign

exchange wont change

my management

structure

Fact: Taking a company publicwill almost certainly cause

widespread change within

the organization in general

and the management

structure in particular. And i

oreign markets are selected,

management may even needto relocate to that country

in order to maintain close

proximity to the investorand analyst community.




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Are we there yet? It alldepends on you.

As weve discussed in previous

chapters, setting and maintaining

a sustainable pace is critical to IPO

success. But nobody likes heading out

onto the open road without knowingwhen the journey may end.

O course, the answer ully depends

on the amount o work that is identied

through the pre-IPO readiness check.

Developing appropriate controls and

eliciting the right behavioral changes canbe complicated and time consuming. In

some cases, companies may have very

little work to accomplish over a matter o

months. This may be particularly true or

some PE backed companies that have

access to experienced capital market

proessionals and rigorous accounting

platorms by virtue o their ownershipstructure. Others, however, may need

to spend a year or more on these criticaltasks, particularly where companies

evolved rom an owner-operator model.

IPO candidates may also need to

consider other timing actors. For

instance, an IPO prospectus mustcontain up to date nancial inormation,

which means that the IPO may need to

occur shortly ater the companys year

end. There are also earnings seasons

on many markets, where certain sectors

tend to announce their earnings within

the same timerame. And there are

even times o the year when companies

would be ill-advised to launch an IPO:

late December and early January, or

example, or over July and August whenmany markets tend to see much lower

trading volumes.

How long will

your trip take?Market turbulence and economicuncertainty can also aect the timing o

an IPO. It would be extremely unwise

or a company to launch an IPO in the

midst o a contracting economy orloss o liquidity on the market. And

while this may delay an IPO by an

unspecied time, the upside is that

once the markets start to recover, these

companies can oten benet rom afood o new capital into the market. For

the rst batch o IPOs during a market

recovery, pent-up demand and excess

liquidity can oten lit valuations above

their initial market prices.

However, setting aside these timing

considerations, and looking only at

the ormal pre-IPO process, most

companies tend to require our to six

months to complete the ull process.But there is much to be done during this

Myth: I can relax once the IPO is

over

Fact: Extensive quarterly nancial

reporting requirements

starting immediately aterlisting, monthly or quarterly

brieng calls, annual

reports, many executives

underestimate the

demands o the incessant

pace o retaining the listing.

Quarterly or semester

brieng calls, annual reports

and analyst road shows

are just a ew o the dutiesthat executives o public

companies must participate

in, and may impact their

ability to tend to their

regular responsibilities.

short time rame, including: regulatory

paper work and reviews; the sourcing

o appropriate underwriters, lawyers,

accountants and auditors; pre-IPO

analyst presentations and investorconerences; the creation o comort

letters and other legal documents; as

well as many other critical steps that

we will discuss in more detail in uture

guides.



Objectivescoping

Pre-IPOdiagnostics

Pre-IPOtransormation

Formal IPOprocess


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Creating a schedule: Key timing

considerations

Is your company up to public

market standards?

Whatisthescaleofchangethat

must be accomplished?Whatresourcesareavailableto

achieve your pre-IPO plan?

Doyouhaveastronghistoryof

nancial reports?

Is the economic environment

right or an IPO?

Isthereliquidityintheequity

markets?

Howhaveinvestorstreatedyour

competitors stocks over thepast 12-18 months?

Isthemarketonanupwardor

downward trajectory?

How long will the ormal IPO

process take?

Areyoulistingonasinglemarket

or multiple?

HowexperiencedareyourIPO

advisors and suppliers?

Canyouexecutivesdevoteproper attention to ullling the

process?

Defnition: Comort letter

A comort letter is a document

prepared by an external auditor

regarding the statutory audits,

statements and reports included in

a prospectus. Comort letters are

typically signed prior to the pricing

decision or a public oering as apart o the due diligence process.

Comort letters are a requirement

o the listing process or manyEuropean exchanges.




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Choosing

your travellingcompanions




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Who should you bring on yourroad-trip?

There are a lot o potential suppliers and partners in the marketthat claim to be IPO experts. But not all o them have the right

experience or every situation. For example, a unique skill set is

needed to support companies that are pursuing a oreign listing,

and companies that are seeking a dual listing will need suppliers

and partners that can operate eectively in both jurisdictions.

And across the board, a high level o experience dealing with your

chosen market is a must. Regulators are becoming increasingly

vigilant about mistakes or inconsistencies in lings and prospectus

paperwork, which can cause unexpected delays and create a knock-on

eect on investor condence. Whats more, experienced IPO partnersare oten able to help their clients achieve a higher valuation by leveraging

their experience and contacts to remove misconceptions and preparetheir client or the rigors o the IPO process.

The partner test: Key considerations or selecting your IPO partners

and suppliers

Do they have the right experience and reach?

HavetheyhelpedsimilarcompaniesconductasuccessfulIPO?

DotheyunderstandhowtheytintothefullIPOprocess?

Dotheyhaveasignicantpresenceinthelocationswhereyouare

listing?

Dotheyhaveatrackrecordorreputationonthemarketonwhichyou

are listing?

Do they have the right culture?

Aretheycollaborativeintheirapproach?

Dotheyshareideasandopportunitiesthatmightariseintheprocess?

Cantheyprovideaprofessionalandhigh-qualityservice?

Are they ocused on what is best or your company?

Dotheyexplorealternativestoensureyouareapproachingeach

challenge in the best way?

Aretheyfocusedonhelpingyouunderstandtheprocess?

Cantheyprovidethebestteamtomeetyourcompanysuniqueneeds?

KPMG proessionals strive to delivervaluable and insightul advice that

cuts through the complexity o theIPO process




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The key players

While the specic suppliers and partners that will be required are dierent rom

market to market and company to company, the ollowing advisors are oten called

upon to support the pre-IPO process:

Player Role

IPO Advisors To conduct a pre-IPO readiness test, IPO candidates will generally want to retain experienced

IPO advisors with a robust understanding o the standards required or public companies and a

holistic viewpoint that includes nancial systems and reporting, governance structures, businessprocesses and controls, human resources and change management.

Lawyers Conducting an IPO will require a team o lawyers with experience developing prospectuses

and structuring capital market contracts. In cases where the candidates in-house council has

prior experience with capital markets, they will oten lead the legal work stream. Throughout the

process, other lawyers will also be involved on behal o your underwriters, banks or auditors.

Accountants From the pre-IPO preparations through to the post-IPO period, accountants will be a key partner

or the nance department. The restatement o past nancial reports and the creation o controls

and processes to ensure a strong reporting unction will all fow rom the companys accountingrm, so it will be important to select a rm with experience in both accounting and system design.

Auditors All regulated capital markets require public companies to employ an independent auditing rm

that can review and attest to the consistency o their nancial records. While it is not necessarilya requirement, many IPO candidates choose to retain one o the Big Four audit rms as their

reputation and independence is generally acknowledged around the world. However, in all

markets, audit rms are orbidden to also perorm accounting services or the same client.

Investment bankers/

UnderwritersUnderwriters perorm a variety o dierent unctions depending on the market and jurisdiction.

In the UK, or example, the investment bank perorms a ormal roll called the sponsor. In all

markets, the investment bank is responsible or disbursing the shares to the market, promotingthe IPO and communicating with institutional investors.

Investor relationsproessionals

Part Public Relations proessional, part capital markets guru, the IR proessional manages the dayto day shareholder communications and the regular investor and analyst requirements. All public

companies will need to maintain an IR unction, and this person or team o people should be

brought into the pre-IPO process as early as possible.

Business Advisory

and IT IntegrationThe pre-IPO readiness check will likely highlight a number o areas where companies will require

the outside support o business analysts, strategists and integrators to create everything rom a

compelling go-to-market story through to back-end technology integrations.



Finding the right partner

Identiying and retaining the right

partners can be a challenge or manyprivate companies. To start, IPO

candidates should talk with their peers

and existing advisors to identiy an IPO

Advisory team that ts their needs andculture. In our experience, it is also

important to select an advisor with a

global network, a multi-disciplinary team

and a strong reputation or successully

advising IPO candidates.

And o course, companies considering

taking the journey to an IPO can alwayscontact any o KPMGs member rms

across 150 countries and in every majormarket. With deep experience in every

step o the IPO process, rom pre-IPO

readiness tests through to post-IPO

strategies, KPMG proessionals always

deliver valuable and insightul advice

that cuts through the complexity o the

IPO process.


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10 stepsto a hazard-reepre-IPO journey 1

Set your destinationknow whether an IPO is the right choiceor your company at this time

2Formulate your equity storya strong equity story highlights the past success

and uture growth potential o an IPO candidate and

helps achieve a higher valuation



3Identiy and select an IPO advisormake sure they have extensive experience and a holistic

perspective

4Choose the right exchangemake sure you are listing on the most appropriate market or your

company and strategy

5Conduct a pre-IPO readiness testfnd out what systems and processes must change beore you can start the

ormal IPO process

6Develop a plan and timelineset a reasonable pace and consider bringing in experienced external support to

augment your team and ensure business continuity

7Close the gapcreate and execute a plan that brings systems and processes in line with market

requirements and norms

8Select your partnersrom lawyers to underwriters, these suppliers must be highly experienced with capital markets

9Create an Investor Relations unction

this will be your conduit to the investors and analysts

10

Prepare your fnancialsyou will need to go back three to our years to achieve the requirements or most markets


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Contact us

Manred Hannich

Global Leader

Global Head o Accounting

Advisory Services

T: +49 30 2068-4125

E: [email protected]

Linda Main

Head o UK Capital Markets Partner

KPMG LLP (UK)

T: +44 (0) 20 7311 8574E: [email protected]

kpmg.com

The inormation contained herein is o a general nature and is not intended to address the circumstances o any particular individual

or entity. Although we endeavor to provide accurate and timely inormation, there can be no guarantee that such inormation is

accurate as o the date it is received or that it will continue to be accurate in the uture. No one should act on such inormation

without appropriate proessional advice ater a thorough examination o the particular situation.

2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member rms o the KPMG network o independent

rms are aliated with KPMG International. KPMG International provides no client services. No member rm has any authority toobligate or bind KPMG International or any other member rm vis--vis third parties, nor does KPMG International have any such

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The KPMG name, logo and cutting through complexity are registered trademarks or trademarks o KPMG International.

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Advisory So You Want to Take the Ipo Road

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