Amid global market volatility, some companies may be reconsidering planned liquidity events such as IPOs or private tender offers. In 2022, for instance, global IPO volume fell 45% from the prior year.1
In the face of uncertainty, what companies can control is the degree to which they are “transaction-ready” for an IPO or secondary offering. Being proactive about transaction readiness can give a company more agency over future timing of a liquidity event, as well as minimize any delays leading up to the transaction.
If a company is thinking of going public or conducting a shareholder liquidity event in the future, here are three things it may consider to become transaction-ready:
1. Have the Right Systems in Place
Planning a large-scale liquidity event or IPO can require a lot more than preparing an up-to-date cap table, the right financial statements and information disclosures. It can also mean putting all the various compliance, corporate governance and accounting policies into place and developing a process for managing the various transacting parties.
Companies can get transaction-ready by putting the right backend systems and processes into place for an IPO or secondary offer. Particularly for an IPO, a lot of accounting, payroll and HR systems may need to work together harmoniously so that the company can capture and record public market transactions. How those systems all integrate and what the experience is like for stock plan administrators and shareholders can significantly impact the transaction timeline.
Even companies that invest in an enterprise resource planning (ERP) system or equity database may need to stress-test those systems to make sure they have everything needed for when the company ultimately goes public. The value of testing and quality assurance (QA) cannot be overestimated.
2. Focus on Data Integrity
There can be a lot of data involved in a liquidity transaction. Not only are shares are being issued or exchanged between buyers and sellers, but there may be detailed financial disclosures required for participants. Often, companies that are going public may need to provide audited financial statements as far back as two years and have the infrastructure in place to produce those statements on a quarterly basis.
Gathering all that data in one place can be a big challenge in itself and the complexity only mounts if companies need to take steps to ensure their data is accurate and reconcilable. Performing a data health check can be an important step a company can take on the path towards transaction-readiness. This includes validating everything from individual equity award and grant information to demographic data. Because all of it feeds into the transaction process, it needs to be accurate.
Remember that a third-party ERP or equity system won’t necessarily catch an inaccurate grant issuance (although a good service provider should help you perform a data health check to help diagnose any issues). Ultimately, the integrity of the underlying data for a liquidity event is the responsibility of the transacting company.
