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Six Steps to Managing Your Pre-IPO Process

Six Steps to Managing Your Pre-IPO Process
 How small life sciences companies can manage the pre-IPO process and not lose out

By John Pennett and Joseph DiFalco

2014 has seen a surge in medtech companies going public. EP Vantage has reported "a frenzy for device company IPOs" with seven firms going public in April 2014 alone - almost as many the 12 firms that went public in all of 2013.  
 
Once a small medtech company has determined that an IPO is the right strategy, the road ahead might seem uncertain and overwhelming. Up until now, internal efforts were most likely focused on developing a viable product, business strategy, etc. Developing infrastructure and documenting business processes, structures, and corporate governance probably were not the main priority, until now. In fact, all are crucial to the IPO process. That’s why preparation and planning for an IPO is the key for a smooth and successful process; and the earlier the planning process starts, the better.
 
Here are a few important things to keep in mind as you prepare:
 
1.) Understand what being a public company means: Public companies need solid financial and business infrastructures, corporate governance, and investor relations. Understanding what the regulatory requirements are upfront is crucial to the transformation of a private company into a public company.
 
2.) Understand what goes into the IPO filing: The actual filing to become a public company contains a significant amount of information about the company’s history, operations, and plans for the future.This may be the first time that this information is being written down, so it may take some time to get it together.
 
3.) Audited financial statements are also a component of an IPO filing: Smaller companies may need additional time to prepare for this, especially if it is the first time the company has been audited. A company’s internal financial leadership will be charged with preparing for the audit. Having a complete command and documentation of all equity/option transactions is critical to a timely completion of the audit. Also, the ability to provide updated quarterly information in “audit-ready” format very quickly to meet changing schedules requires building of infrastructure.
 
4.) Develop a Team: A strong team of internal and external professionals is a must for managing the process leading to your IPO. Reputable individuals and firms who have been through the process are critical to success.Here are some examples:
  • Senior internal leaders including the CEO and CFO
  • Underwriters and investment bankers, who understand the industry
  • Legal counsel with SEC and industry experience
  • CPA firm with IPO, public company and industry experience
  • Other consultants and advisors, as necessary to assist with audit and filing preparation
5.) Choose the leader: Having a strong team is important, but identifying the team leader is equally as important.This will be the key person who will drive and manage the process and can either be a company employee or an outsourced resource, who may be more experienced with the process.
 
6.) Structure a timeline and assign tasks: A timeline of events that need to take place pre-IPO is a must to set expectations with the team, and to allow the leader to manage.
 
Understanding and managing the IPO process is critical to success. Surrounding the company with a team to reach the goal is the most important step.
 
 
John Pennett, CPA, is partner-in-charge of EisnerAmper’s Life Sciences group. His more than 25 years of public accounting experience includes numerous IPOs and secondary offerings.
 
Joseph DiFalco, CPA, is a senior audit manager with over 10 years of public accounting experience. Joe has participated in IPOs, secondary offerings, and SEC filings for life science and technology companies.
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