May 21, 2019
If you’re on the road to an IPO, it’s time to begin functioning as a public company. This changes the way a company operates internally and how it interacts with external stakeholders. As such, it is vital that organizations identify and address any gaps or deficiencies before going public. Organizations that are ill equipped to function as a public company risk the loss of investor confidence and of equity value that can potentially be measured in tens of millions of dollars or more.
An IPO is a complex undertaking for any organization and has a pervasive impact across many functional areas within the company. Preparation can be lengthy depending on the relative maturity of the company, its business model and existing people, processes and systems. As every company is different, preparation to become a public company can span from 6 to 18 months or even longer.
This window gives a private company the opportunity to build the capabilities to think, act and perform as a public company. The magnitude of the required improvements will directly impact the level of effort and resources required. Going public requires careful planning, executing and monitoring of activities across several areas of an organization requiring close coordination. As such, we recommend developing and executing a comprehensive project plan.
On top of this complex company overhaul, time pressure will only increase as a company gets closer to formally launching an IPO, forcing an organization to prioritize multiple workstreams to complete the most important elements before launch and eventual pricing. The better prepared a company is, the more efficient and potentially less costly, and painful, this process can be.
Enter the project management office (PMO)
Launching a successful IPO requires making several decisions and coordinating complex activities across various parts of your business to achieve common goals. Strong project management is critical to success. For a project management function to be effective and operate efficiently, it will require two things: the right people and strong governance. The PMO needs individuals who have strong project management skills and also have transactional IPO experience so they understand the content and process. The PMO requires a strong project governance structure with proper decision-making authority delegated at each level of the organization, a detailed project plan with accountable owners and a robust communication and reporting cadence. An effective PMO can help drive the following:
- Reduced execution risk: Becoming a public company generally requires changes in systems and processes in multiple functions across the organization (finance, legal, treasury, IT, controls, compensation and benefits, etc.). A PMO will set up plans to guide and manage all cross-functional areas, as well as provide a mechanism for effective tracking and ownership of activities. This allows management to more effectively deploy and use internal resources and spend to address critical organizational changes before becoming a public company. Effective tracking of the timing of activities is important in accessing available windows to the capital markets.
- Fewer surprises: A PMO provides ongoing project monitoring and change management throughout the IPO process. As key milestones are hit, the timeline progresses, issues arise and external factors potentially impact the filing date, a PMO provides ongoing tracking, communication and reporting to the working group so there are fewer surprises along the way.
- Increased project efficiencies: Developing and executing on a comprehensive project management framework enhances efficiencies throughout the process of preparing to go public. Making sure your PMO has access to the right technology and tools is essential to your overall success. Automation is key to reducing human error, enabling you to have real-time decision-making data at your fingertips and significantly increasing efficiencies throughout the project. Automation also enables employees to use their time (which is probably already very stretched) on true value-add activities.
- Enhanced transparency and accountability: Developing a detailed project plan with clearly defined ownership makes it easier to see how your company is progressing on the IPO project. Through the development of a comprehensive communication framework, a PMO can provide key stakeholders within the organization, the executive management team and the board of directors with intuitive reports about how each workstream is progressing and whether the overall project is on track
- Improved issue resolution: Issues will arise during your quest to go public. A PMO provides a resolution framework that identifies how issues will be raised and resolved throughout the course of the project. This governance structure determines who will make resolution decisions and then monitors progress toward executing on those decisions to ensure that issues are properly mitigated.
Overall, an IPO generally receives a lot of internal and external attention, but in reality it’s no different from any other business initiative. An organization would not think twice about starting a complex systems implementation without a project manager. Why should an IPO be different? The complexities, cross-functional participation and interdependencies of an IPO require the discipline and rigor of an effective project management office.
For more information about navigating the IPO process, check out Roadmap for an IPO: A guide to going public. If you’re just getting started, view this video to get an overview about the readiness assessment – a vital first step of the IPO process.