Preparing the business for an IPO

The IPO market may currently be dormant, but it will certainly come back at some point in the economic cycle. Given that it usually takes 18-24 months to plan and prepare properly for flotation, now is a good time to take advantage of quieter conditions and start laying the foundations for the future.

KPMG were headline sponsors at the recent London IPO Forum, organised by the London Stock Exchange (LSE), where preparation for an IPO was the central point of discussion and threw up lots of food for thought.

A key thread running through the conversation was that flotation really does require a lot of work. This is partly about preparing the information that will be needed for investors and showing that all appropriate due diligence has been carried out – but it is also about making sure your organisation will be able to quickly adapt to the higher reporting and governance demands that come with being a listed business.

The Finance team may need to be expanded and strengthened given that with the move to publicly available audited accounts, cycles get faster with more to report and additional disclosures such as around climate and sustainability, resilience statements and other reporting. As the business will now be dealing with price sensitive information, you will need robust internal reporting and forecasting to make decisions quickly and inform the market. There is a much more significant volume of information required to keep up effective investor relations.

There is significantly more governance, too. The Board’s functions may need to be expanded – and minutes of its meetings will have to be documented for reporting purposes – and new committees are likely to be necessary. The Company Secretary role will grow in importance to make sure the Board and other committees are functioning efficiently and have the required information and pre-briefings. Non-executive directors (NEDs) will also be needed – and it’s important to appreciate that they will probably only receive information every 4-6 weeks and will be out of the day-to-day detail, so you will need the right mechanisms in place for them to bring value in their contributions.

With reforms to UK corporate governance also on the way, internal controls will be more under the spotlight than ever – so any business thinking about coming to market should start the process of ensuring it has a robust controls framework in place that is scalable to the requirements as it grows.

Then there is the hot topic of ESG. It is essential to plan ahead for the disclosures that will expected by the market – such as a TCFD report. Front load your ESG work now, perform a materiality assessment, and ensure that what you will be reporting is concise and relevant. Increasingly, we are seeing companies ask for verification of their ESG metrics, as these need to be absolutely robust: you do not want to backtrack on ESG figures disclosed or be accused of ‘greenwashing’.

Diversity and equality is another key consideration. If you don’t have 40% female representation on your Board, and good levels of diversity through the business, you will be asked why not. Start considering your diversity footprint now and whether you need to take steps to improve it.

Through all of this – needless to say – good advisors can make all the difference. Make sure you have advisors at your side whose judgement you trust and whose insights add value – and who you can forge a long-term relationship with as your business grows and evolves. Consider asking them to conduct an IPO readiness assessment – a short piece of work that can identify gaps, prioritise actions and help you get ready for the journey.

Finally, don’t be put off by all of the above! There may be a lot to do, but approached systematically and with enough time on your side, it is entirely manageable. It will help your business mature its systems and processes so that you hit the ground running at IPO and go from strength to strength as a public company delivering value across your stakeholder communities.