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Ready for the Next IPO Wave? Here's What CFOs Need to Do

In 2021, the United States public markets experienced a memorable and historic year, with the Nasdaq and NYSE exchanges setting records with 1,053 initial public offerings. However, as macroeconomic conditions, geopolitical tensions, inflation, and rising interest rates created uncertainty and volatility in the market, valuation multiples plummeted, causing many companies to delay or cancel their IPO plans.

In 2022, only 191 IPOs were recorded on the Nasdaq and NYSE exchanges, and headlines continue to be dominated by concerns such as inflation, potential recession, and banking turmoil, leaving companies and investors uncertain about the timing of the next IPO window.

While going public is a significant milestone, it's crucial for management to recognize that it involves a transformation of the business, including enhancing current processes, controls, and infrastructure to support additional financial reporting requirements and operational needs of a successful public company.

One of the most challenging time periods that a CFO can go through is when the company decides to go public. Whether it’s an IPO, SPAC, or direct listing, it’s impossible for a CFO to be fully prepared for the large amount of work that will need to be done and the intense scrutiny that comes along with it. While many companies have put public listing plans on pause, CFOs would be wise to follow these 6 tips to get ready now for when the IPO window reopens.

1) Keep Customers as the #1 Priority

Engineering a successful IPO, SPAC or direct listing requires a ton of work and comes with much scrutiny. CFOs need to provide large amounts of data on operations and financials as well as detailed information about business strategies at any given time. It is important to keep this from getting in the way of the reason why the business has been successful until now: serving customers.

For one, all of the additional time and energy spent on getting everything in order for going public can take away from company-wide efforts in keeping up a high level of customer satisfaction, but there is another aspect as well. Communicating customer-centric business strategies to stakeholders and staying focused on delivering for your customers even during this busy time is important for all parties involved- employees, investors, and most importantly, customers. Having real-time access to customer, sales, and operational data will be critical in driving success in the going public process and bringing clarity to the lengthy and difficult process.

2) Build the Finance Department Functions Early On

FP&A and tax are two important functions that the CFO needs to establish well before the company goes public. Oftentimes, these are not fully ready, yet they are two of the most critical components in going public as everything goes through them. Furthermore, they should be established well before the process is started due to the fact that it can take a while to integrate into the company plan and vision-something that an organization does not have time for during the time pressures of going public.

Tax exposures are aspects that are usually overlooked, as they are far more time-consuming and complicated when going public in comparison to regular day-to-day business activities. But FP&A can’t be ignored either. Having a solid FP&A function means finance can communicate the business’s long track record of meeting performance goals. Having tax and FP&A in order will save companies a lot of headaches throughout the process.

3) Establish a Secure Data Room

There is no way that a company can even begin to think about going public until it has all of its documentation in order. Formation documents, accounting files, financial statements, board minutes, securities instruments, employment information, intellectual and real property records, and the many other documents needed must be analyzed and organized into a central data room.

There are a lot more rules and regulations for public companies, so it is crucial to be fully prepared to present anything that is requested and to be able to do so quickly. Uploading and organizing this information in a secure data room well in advance will facilitate the entire IPO process.

4) Ask For Help From Other Finance Chiefs

People don’t like asking for help, especially those that are in leadership positions, such as CFOs. But a big part of the preparation, especially if it’s the CFO’s first IPO, is to lean on other CFOs, particularly those with experience running public companies, and there’s no shame in doing this. Questions are guaranteed to pop up about compensation, public company governance, or any other complicated tax and document structures.

But CFOs tend to be introverted and hesitant when it comes to asking for help, and this can be a big mistake. Getting out of your comfort zone is important during this process. Whether it be reaching out to a mentor or joining a finance community channel, a few minutes of communication can provide valuable insights and be a tremendous help. On the way it will help you boost your communication and connections and challenge the way you think by showing different perspectives. It can be good for any person at any time, but in this case, it’s extra useful.

5) Know How to Tell Your Story

CFOs take on multiple roles when their company is going public. From finance leaders to storytellers to forecasters and executive leaders, CFOs do a lot of everything. Therefore, it’s not enough just to have a good company story, it needs to be told in a way that resonates with a broad audience. Being able to articulate all of the different aspects such as product roadmaps, brand identity, and growth objectives is fundamental to instilling confidence in stakeholders and the broader market.

CFOs don’t need to take on all of these roles themselves, but it’s important to communicate them to the rest of the finance team. Whether the company storyteller is the CFO or a different executive, they need to be armed with real-time information on financial performance and KPIs that create a narrative that others can relate to. Depending on who the audience is, it could mean making it simpler, shorter, or even more in-depth. Financial data is the foundation, but being able to show the company vision, along with other KPIs and commitments that are important to investors and the public is no less important, and having a storyteller who can do that is of utmost importance.

6) Bridging It All Together

One of the most important relationships in this time period is the CFO/ CEO relationship. The CFO’s job is to understand why the company is listing and what the next steps are so they can explain this to investors. The CEO’s job is to be the company-wide leader and align the financial messaging from the CFO with the overall story the CEO wants to tell.

Once again this is a two-part aspect. If the CFO/CEO relationship is shaky, not only will it harm the company and the difficult process of going public, but stakeholders and the public will see through the facade as well which will cause them to lose belief that the company is as trusted and professional as they are trying to portray. A good relationship brings confidence and smooth sailing to all parties involved.

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