Going public? Six areas to consider when formulating your day-one plan

Once your company goes public, it’s tempting to think the toughest leg of the journey is behind you. But where one monumental task ends, another begins.

I’m talking about the filings, processes, and policies that are part of the reality of doing business as a public company. The sooner you can implement these in your company, the smoother the transition from private to public ownership may be. As you might be thinking about getting ready for the next IPO window and contemplating how ready your company will be for the requirements and demands of operating as a public company, consider areas where you can invest time and resources now that will pay off later. I call this “no-regrets spend,” and what follows are some areas you may want to consider.

1. Finance and accounting

Public companies must report accurate financials timely in as little as 45 days. The following could improve the reporting process:

?·?????? A disciplined, timely process for collecting accurate data from the business, reviewing the reports, and filing 10-Qs and 10-Ks.

?·?????? A process for disclosing major and/or material financial events to the public via investor relations and SEC filings.

?·?????? Defined accounting policies and benchmarks.

?·?????? Integration of key functions like investor relations, financial planning and analysis, and accounting.

?2. Corporate governance

Board members may need assistance understanding their responsibilities and fiduciary duties from day one. Regulations require directors to disclose their role in risk oversight. This means the company could benefit from having overall governance measures in place throughout the organization, including:

?·?????? Protocols for key executives, especially the CFO, to share information with the board.

?·?????? A compliance function to establish and implement the internal controls and policies that the law and various regulations require.

?·?????? Strategic risk management programs and processes for executives and board members.

?3. Internal processes and controls

?A public company should have robust internal controls in place, including:

?·?????? A process for conducting an annual evaluation of the operational effectiveness of the company’s internal control over financial reporting, among other activities, as required under Section 404(a) of the Sarbanes-Oxley (SOX) Act.

?·?????? A process to review the accuracy and completeness of management disclosures under Sections 302 and 906 of SOX.

?·?????? A plan to remediate internal control deficiencies, if they arise.

?4. Information technology (IT)

With information being a crucial asset in the modern corporation, IT has a front-row seat for major executive-level issues and discussions. Consider leveling up your IT capabilities with:

?·?????? Enterprise resource planning solutions, which are enablers to key departments such as finance, human resources, and operations.

?·?????? An integrated approach to managing IT risks that includes oversight of internal controls, efficient compliance systems, and automation of controls monitoring and testing.

?·?????? A cybersecurity assessment that includes components such as application and network security, threat intel, and software vulnerability.

?·?????? Business continuity and disaster recovery plans to guide executives and the board during a cyber incident.

5. Tax

Public companies are often subject to more complex tax requirements, depending on the company’s tax provision. Companies previously operating in pass-through status for tax, for instance, will likely become part of what is known as an Up-C structure , which includes additional tax provision calculations and maintenance and reporting around tax receivable agreements.

An IPO may also require other limitations on tax attributes or the deductibility of executive compensation, as well as other tax nuances.

6. Environmental, social, and governance (ESG)

The ESG landscape can be fast-moving and complex. Disclosure may become more important as regulators react to investor-led demand for greater transparency around companies’ ESG performance. Consider preparing for this possibility with:

·?????? Routine monitoring of new and updated regulations across relevant jurisdictions.

·?????? Technology that tracks emissions and other ESG goals, plus a reporting tool to reliably store collected data.

?·?????? A reassessment of internal controls to validate collected data, monitor in-place systems, and review draft disclosures.

?·?????? A formal operating, management, and governance model to oversee ESG reporting processes and promote effective communication.

Smoothing the transition to a public company

There’s no getting around it—going public can be a demanding endeavor. But with upfront planning, you can ease the transition to a public company with operations that contemplate each of the considerations outlined here. Our complimentary IPO SelfAssess tool can help you gauge your level of readiness with a tailored assessment. The tool provides you with useful insights and identifies potential areas for improvement based on the feedback you provide.

If you have any questions or would like to talk through ways your own company can start down the path to day-one readiness, please contact me.

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