We’ve all heard the phrase “failing to prepare is preparing to fail.” The thought of going from a private entity to a publicly traded company can be overwhelmingly stressful as you prepare for this transition, especially when you ask yourself the following question:
Do I know all the steps and processes that need to take place in order to successfully help my company make the transition to a publicly traded company?
For many, the answer is likely no; unless however, you’ve been in the position where you’ve been at a company through this intense transition. For those who haven’t been through it or for those whom need a refresher, here are some things to consider in a pre-IPO company:
- Vendor Management: You will have to successfully navigate through the tedious and time-consuming process of selecting the right vendor(s). In the industry of equity plan administration there are software providers, transfer agents, banks, brokers, legal services, payroll providers, law firms, stock plan administrators/consultants, and specialized outsourced service providers. Each company is unique in the plans they offer, the complexities of the plans, international compliance, who is granted equity, rate of growth, etc. To match the demand, each stock plan system, outsourced provider, or consultant(s) have unique strengths that match the needs of the different types of clientele. There is no “skeleton key” or “one size fits all” when it comes to selecting a provider(s) and it’s very important to choose the right one(s) for you. How do you know which ones are best for you? More on IPO – Vendor Options, Selection, and Management.
- Plan Review: You will need to review your stock plans to make sure they are clear and transparent. You will want someone with adequate expertise to review the plans and see if the need to be modified in any way to be compliant. If this is the first time implementing a type of plan or new/revised plans are being considered, you need to weigh the pros and cons as well. If you are an administrator, you need to have a seat at the table and your voice heard when decisions about new plans are being considered. Often times, complex compensation triggers or timelines sound great in theory, but the last thing you want is to have a plan that ends up being a headache to administer or to handle accounting on. Nip it in the bud and do it right the first time.
- Timing: Set a time table well in advance of going public. Going back to the initial statement of “failing to prepare is preparing to fail” is very true when it comes to going public. You need to have a project plan so nothing major is overlooked and that proper resources are allocated at specific times. Again, it is recommended to have some type of setup, review, or oversight of this process by an expert who is familiar with an IPO process.
- Data Cleanup: It is imperative that company data is compliant before you go public. Correct any issues beforehand and have an audit performed. More often than not, you will find something that needs to be fixed. Avoiding investing time and resources in this upfront can be much more costly down the line.
Our Take:
These are just SOME of the important things you need to address prior to making that transition. It’s important to work with a company that can guide you through the pre-IPO process and beyond and take some stress off your plate as you have enough to worry about.
Equity Point is here to assist in not only providing further high level guidance (like what is outlined in this article and related articles) but open the doors to the different kind of specialized vendors in this space. We have partnerships with multiple software providers, outsourced providers, staffing and consulting agencies, and a network of independents to leverage and ensure you find the right vendor at the most competitive price. Talk to us and we can recommend specific options, gather quotes, provide consultants or candidates for placement/temp-perm.