How quickly the sentiment on the Stock Market changes has most recently been witnessed with successful and not so successful IPOs as well as late postponements in September and October of 2023. Therefore, it is important to be ready for the next IPO window when the market returns. 2023 has so far been a weak IPO year worldwide as well as in Germany. Geopolitical tensions, rising interest rates and slowing economic growth put capital markets under pressure and weigh heavily on investors’ willingness to engage in new equity issuances. With only three IPOs completed in Germany so far in 2023 and a number of IPO cancellations, many potential issuers are dismayed at the chances of a successful capital market debut. However, while each downturn is different from others, this is not the first one in the IPO market.
Most recently, the financial crisis in 2009 and the beginning of the COVID-19 pandemic in 2020 caused capital markets worldwide to tumble and volatility to skyrocket. Currently, there is a lot of uncertainty in the market, but experience shows us that the question is not “if” the IPO market will return, but merely “when”. And once the market returns, companies planning an IPO must be able to execute their transaction quickly. Otherwise they risk that a favorable issuance window will pass or others will attract investors’ attention earlier.
Therefore, companies are well advised to start their IPO planning early and independent from the situation in the capital markets. This will give a private company time to build the capabilities to think, act and perform as a public company and be ready when the market returns.
Early planning
There are different ways to approach the capital market (IPO, SPAC, direct listing) and management needs to be clear about its concrete goals in order to choose an adequate way to get listed. Relevant questions for management and owners include:
- Does your company have an attractive Equity Story and is it based on reliable and reproducible facts and data?
- How much capital does your company need before and after going public?
- Which investors do you want to attract with your offering?
- Do you have a realistic timeline for the IPO which includes the preparation of high-quality information for inclusion in the prospectus? Can it be accelerated, if a favorable market window opens?
- What steps are required for your company to be ready to be a public company (e.g., financial reporting, controls and processes)?
- What measures need to be taken in order for your company to be fully prepared for the rules and regulations that come with a listing, but also with the demands and requirements of professional capital market investors and the public?
Going public requires management to be prepared to meet shareholder and market expectations from day one. This includes addressing ongoing compliance and regulatory requirements, increasing operational effectiveness, speeding up periodic reporting as well as establishing investor communication.
Getting prepared
During the IPO process, companies often struggle with the requirements to complete the transaction, prepare for the ongoing obligations of a public company and drive business growth. Therefore, companies are well advised to objectively assess their readiness for going public and life as a public company well in advance of the IPO execution process.
A Readiness Assessment can help management to identify the most critical areas where current processes and structures fall short of regulatory requirements, investor demands and/or best practice. This will allow management to estimate time and effort, set priorities and implement measures to remedy any deficiencies in their effort to increase operational maturity and ultimately prepare for a self-defined capital market roadmap.
In our Readiness Assessment we analyze your company's status quo in relation to a comprehensive set of readiness areas. Where we identify any shortcomings, we provide concrete recommendations as to their remediation, including proposed priorities. As such, the Readiness Assessment can be your starting point to develop a realistic project plan and identify and allocate necessary internal and external resources on your way to full capital market readiness.
Life as a listed company
An IPO is only the beginning. For a successful capital market entrance, a company must act and function as a public company, both internally and externally, from the beginning.
For a successful capital market entrance companies need to:
- Be able to provide investors with accurate forecasts and communicate expectations and core KPIs;
- Be ready for frequent communication with investors, analysts and the media to ensure that the company's story is portrayed accurately as public perception can have a direct impact on share value.
An early start is the key to a successful IPO, especially in times of increased uncertainty, which we expect to continue in the medium term.
Are you considering an IPO as a way to secure the future of your company? Our specialized and industry-experienced team can assist you in all phases of the IPO process. We help you evaluate the pros and cons of going public, guide you through the listing process and prepare your company for life as a public company, regardless of which market you choose. In doing so, we can provide support with all structural, operational and regulatory issues that may arise along the journey.
Follow us
