F&A Priorities: Preparing for a Successful IPO

Today’s business environment is more dynamic than ever. Business leaders are focused on strategic initiatives to position their companies for long-term growth, to gain competitive advantage, and to drive shareholder value.

Top of mind for many business leaders are topics like recruiting and retaining top talent, remote work enablement, and digital transformation, to name a few.

As business leaders focus on making strategic decisions around these areas, accounting teams are being increasingly relied upon to provide data and insights and to serve as strategic advisors to the business.

This post is part of a series discussing areas of focus that require active accounting input, why it matters to accounting leaders, and the risk of doing nothing.

Since 1983, there have been an average of 379 initial public offerings (IPO) each year, with as few as 53 in 2008 and as many as 958 in 2021. With many finance and accounting leaders at private companies evaluating the market for a potential IPO, going public remains an ambitious goal for many organizations, regardless of market conditions.

And it’s no wonder. An IPO is an exciting opportunity with many advantages for growing organizations. Notably, it’s an opportunity for organizations to:

• Raise capital

• Accelerate growth potential

• Increase value for shareholders

• Restructure debt positions

• Develop a prestigious corporate identity

The IPO market fluctuates based on economic conditions and other changing market factors. These changes can happen slowly, with notice, or seemingly overnight. So, if your organization is thinking about going public, planning your roadmap, or in full execution, it’s important to be prepared, regardless of current market conditions, so you can successfully IPO when the timing is right.

It sounds simple: establishing and maintaining preparedness will directly impact the outcome of your IPO. But readying your organization for an IPO isn’t simply hiring an SEC reporting team. There are many other critical considerations and compliance requirements to assess. According to Deloitte, there are three critical areas across an organization to consider when preparing for an IPO:

1) Accounting and Reporting

2) Process and Controls

3) People

There is also significant value at stake—before, during, and after—an organization prepares to go public. Going public means increasing visibility of operations, processes, and financial results with regulators, investors, competitors, and other external stakeholders. PwC states that organizations usually face higher costs related to maintaining public company requirements. These costs are frequently a direct result of the preparation process.

A successful IPO requires strategic planning, tactical execution, and the modification of finance and accounting processes across the organization. In other words, preparing for an IPO takes time, effort, and alignment across your organization, not to mention alignment with external advisors including legal and accounting advisors. Although an IPO can be done in as little as six months, the most successful IPOs have occurred after at least 18 months of preparation.

According to Deloitte, 43% of all companies who recently completed an IPO felt they started the process too late. It’s no wonder the IPO success rate is only 20%, according to Nasdaq.

With increasing regulation, changing investor demands, fluctuating market conditions, and greater accountability of company executives, not being prepared for an IPO can add unnecessary risk, cost, and stress. A breakdown in accounting processes anywhere in the organization, from how revenue is recognized to how the books are closed, can lead to large ramifications to a public company, including:

• Loss in revenue and market share

• Reduction in market capitalization

• Damage to investor confidence

• Fines, penalties, and investigations

• Employee and talent attrition

IPO readiness includes not only preparing for the initial public offering but also readying internal processes like finance and accounting to assure accuracy, completeness, and timeliness of financial data to management, reporting teams, and external stakeholders. Being ready is more than just preparing audited financial statements, it includes the people, processes, and technologies that enable an organization to consistently provide accurate, timely, and complete information to a new and expansive pool of stakeholders.

Improving your accounting processes is critical to readying an organization for an IPO. Establishing a strong control framework, auditable processes, and accounting automation to reduce error-prone and repetitive tasks drastically reduces the likelihood of risks and breakdowns in those processes. BlackLine enables organizations to meet their IPO goals with technology that enables automation, control, and visibility across accounting processes to significantly enhance the accuracy, timeliness, and completeness of financial reporting results. Most notably by:

Timeliness: BlackLine transforms repetitive accounting work with a streamlined and automated approach that enables teams to efficiently and quickly deliver financial results.

Accuracy: BlackLine’s configurable rules layer preventative and detective controls directly into accounting processes to drive rigor and limit the likelihood of breakdowns.

Completeness: BlackLine’s cloud-based solutions unify data from various systems and make it easy to store and review results as well as supporting documentation and share information cross-functionally or with auditors.

Most importantly, going public often means readying your organization for fast-paced growth. BlackLine readies organizations for their IPO and scales as they grow, unlocking more productivity and efficiency over time, long after the bell rings.

There’s no denying that increasing regulations, stakeholder scrutiny, and changing market conditions have business leaders rethinking their timelines and preparedness for an initial public offering. However, properly preparing with a focus on people, processes, and technology across an organization can be the greatest indicator of a successful IPO.

Learn more about how you can proactively prepare for a successful IPO by readying your F&A teams.