Navigating your IPO How PwC can help Optimize deals

Optimize deals
Navigating
your IPO
How PwC can help
PwC’s Deals Practice
IPO Services
Where to start?
You’ve decided to explore the
potential for an Initial Public
Offering. But where do you start
your exploration? You know it’s
going to be a transformational
event. You know there are many
advisors you will need on board to
help you navigate the significant
challenges of going public.
This is where PwC can help
Most private companies are likely unprepared to be public and will need a significant investment of management
time and funds to bring their capabilities up to public company standards. This period of preparation which PwC calls
“readiness” can be 12-24 months depending on the maturity of the company. The first step to readiness is an assessment
of where your company currently stands. You can’t change what you don’t measure. PwC can help you properly assess
and identify gaps in your company’s public company preparedness.
Ask yourself a few basic questions to test your readiness to be public
Q1) Do you have the appropriate number of
people with the requisite skill sets needed in
your finance department?
Q2) Are you currently constructed with an
optimal tax and organizational structure
from a tax perspective for an IPO?
Consideration: Having the right number of people in
the finance function is not only critical to enabling the
completion of key tasks like closing the books, forecasting
and the preparation of the ongoing reporting requirements
as a public company, but also enabling that a strong control
environment is maintained. In PwC’s analysis of material
weaknesses (MW) a key issue is insufficient accounting
personnel (27% of MWs) leading to issues with insufficient
separation of duties (11% of MWs) (see figure 1). You will
need to develop the right people and processes to prepare
a thorough budget for at least 4 quarters in the future for
earnings releases.
Consideration: Tax structure can have a significant
impact on a public company’s financial reporting, legal,
and tax outcomes and should be undertaken early to avoid
unnecessary costs, inefficient processes or unexpected
issues and delays. There are complex tax structures that
are becoming increasing popular, some of which can be
extremely time consuming and from our experience can
take up to 6 months for a company to design and establish.
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Navigating your IPO: How PwC can help | PwC
Figure 1: Material weakness disclosures
Other
6%
Segregation
of duties
Figure 2: Material weakness remediation solutions
Insufficient
technology
systems
80%
70%
5%
27%
Insufficient
Accounting
Personnel
11%
60%
71%
59%
50%
40%
30%
20%
22%
18%
14%
13%
10%
Lack of
Review
Processes
0%
16%
18%
17%
Lack of
proceedures
Inappropriate
reconciliation of
complex or
non-routine
transactions
Source: S-1 Filings for IPOs between 1/1/2014 and 12/31/2015. A company may have
more than one material weakness disclosed in an S-1 filing
Q3) How long does it take you to close your
books and what does that include regarding
management effort?
Consideration: The close of the ledger may be within
10 days, however that probably doesn’t include the
required footnote disclosures (US GAAP and SEC),
preparation of the Management Discussion & Analyses
and completion of the required internal certifications
and reviews by auditors, audit committee and board of
directors. As a public company, you’ll need to be able to
meet all of this within 40 or 45 days following the close
of the quarter and 60, 75 or 90 days at the year-end.
Q4) Are your internal controls and audit
procedures public company ready?
Consideration: Similarly, our review of newly minted
public companies shows 33% of MWs stem from a lack
of procedures and review processes (see figure 1). Prior
to going public, you will need to establish a process for
your internal review and sign-off of internal controls to
allow for the CEO and CFO to certify that the financial
statements are fairly presented and contain no untrue
statements of material facts. These certifications are
required to be filed in the first SEC filings after going
public. If any material weaknesses have been identified,
they would be disclosed in the registration statement.
Hire additional personnel
Establish or revise formal policies and procedures
Hired CFO
Hired third-party consultants
Prepared training materials/programs
Other
Source: S-1 Filings for IPOs between 1/1/2014 and 12/31/2015. A company may
employ more than one solution to remediate a material weakness.
Q5) Is your compensation plan competitive with
companies like yours in the public markets?
Consideration: Over 90% of companies introduced
at least one new equity compensation plan at IPO. Shifts
from stock options to restricted stock and the introduction
of performance plans in conjunction with options and/
or restricted stock are common. It is important to develop
a compensation strategy that’s right for the company
in order to retain key executives and for long term
incentive plans.
The first step to readiness is
an assessment of where your
company currently stands.
Navigating your IPO: How PwC can help | PwC
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IPO readiness
Getting started
How do we deliver?
PwC has committed over 500 partners and staff to helping
companies like yours assess and then build the capabilities
to be a public company. We’ve developed a proprietary IPO
readiness assessment using a holistic framework which is
both time efficient for senior management and thorough
in scope. With one call to our Capital Markets team, you
can mobilize a team to be with you quickly and be ready to
advise and assist you in your assessment.
We typically need just one day of your time supported by
selective follow up calls. PwC can mobilize a team in any
region of the US, or the globe for that matter, to help you
assess your readiness in a very efficient manner. We will
ask you for one day of your time for a workshop where
we will discuss with your most senior executives how
you are managing and executing your business across
everything highlighted in the five questions we posed
above. Beyond those core areas which are often complex
and time intensive to build, we will cover a wide range
of other topics including risk management, technology,
cyber security, governance, corporate strategy, treasury,
legal, investor relations and project management. Selected
follow up via conference calls enables us to round out our
picture of your readiness.
When should you know your state of
readiness?
Most companies underestimate the significant effort and
time needed to develop the capabilities needed to be
public. Twelve to 18 months ahead of an IPO kickoff with
your legal and banking team would be the optimal time
to assess your state of readiness. This affords your team
the time needed to build out your capabilities in such a
way that your IPO process proceeds smoothly. It’s much
more challenging to try and develop your capabilities
while in the middle of an IPO process. You still have to be
able to run your company and the demands of a readiness
are significant as are the calls on your time from the
IPO process.
What do you achieve?
In a matter of 3-4 weeks you will have our initial
recommendations by functional area to be public company
ready. You will gain knowledge on how to navigate the
winding road to readiness and where you may need PwC
or other advisors to help you. You will be able to determine
where the commitment of time and resources will likely
be substantial, as well as where you already possess the
appropriate level of capabilities—in keeping with a public
company state of readiness.
We’ve developed a proprietary IPO readiness
assessment using a holistic framework which
is both time efficient for senior management
and thorough in scope.
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Navigating your IPO: How PwC can help | PwC
The big picture
Start early
The portrayal of the timeline that needs to be in your
mind is below. Unlike timelines that focus on the “going
public” process typically signified by the kickoff meeting
with bankers and lawyers, the PwC timeline is thorough.
We know from experience that companies need time
to transform their practices internally and move the
organization into a public company mindset. If you are
thinking about being public in 1-2 years, you are currently
in the hot zone of this timetable. The PwC readiness
assessment applies a holistic framework designed to help
you guide your company through pricing into public
company status. Again, your guiding principle should be to
create an organization capable of “being” public vs simply
“going” public.
The IPO Timeline
Kickoff meeting
12-18 months
6-9 months
Assessment
Pre-Kickoff/Planning
Readiness
Planning and
preparation
IPO pricing
IPO process execution
Years
Post-IPO/Public company
Going public
Execution of the IPO process
Being Public
Application of a holistic framework to transform the
company, enabling it to operate as a public company
Navigating your IPO: How PwC can help | PwC
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PwC as your IPO advisor
We offer:
• A uniquely positioned firm that has mobilized a
thorough set of integrated services to advise you from
your strategic planning stage through the execution
of your IPO and then to prepare for life as a public
company and beyond.
• A dedicated team of professionals specializing in IPOs,
who can leverage the power of PwC’s global reach,
our broad advisory and tax capabilities, to thoroughly
address the components of your offering.
• A proven track record involving thousands of complex
IPOs to help you move forward quickly and efficiently.
• Advising you in your proactive resolution of issues
hopefully decreasing surprises and delays in your
IPO process.
• Deep technical skills combined with in-depth industry
knowledge and experience that helps us provide
services tailored to your unique needs.
What our clients are saying about IPO readiness and PwC
“We had a huge initiative to get to our
IPO. PwC brought their ‘A game’– their
depth of technical expertise, cross functional
approach to an IPO and overall leadership
skills helped us to achieve our IPO in a very
short timeframe.”
“It was a huge undertaking to get through the
Registration process. PwC’s commitment and
effort enabled our portfolio company to overcome
language, cultural and technical hurdles literally
on a global scale. They assembled a strong team,
accessed critical internal channels and were
highly responsive throughout the process.”
– CFO, Energy Company
– CFO, Private Equity
“A lot of firms can help with the project.
The difference is the people. PwC brings
an experienced service team that
understands our company and the
transaction challenges, and know how
best to get the work done.”
–C
hief Accounting Officer/Controller,
Manufacturing Company
“PwC is really the only choice
when it comes to IPO work.”
– Corporate Controller &
Chief Accounting Officer,
Technology Company
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“PwC is a great firm,
but service comes down to
people, and they are truly a
fantastic service provider.”
“The PwC team was outstanding and
they certainly made the path getting to
bell-ringing much more tolerable than
it would have been otherwise. We all
appreciated their support very much.”
– Senior Vice President & Chief Accounting
Officer, Hospitality Company
– CFO, Private Equity
“We never did an IPO assessment and I
wish we would have. It would have made
the IPO process much easier. It was much
more intense and time consuming than I
had expected.”
– Corporate Controller & Chief
Accounting Officer, Technology Company
Navigating your IPO: How PwC can help | PwC
“We really appreciate
all the great work the PwC
team did on our offering.
Your help got us through a
critical junctures–technical
accounting hurdles, due
diligence support and S-1
crunch time. Great work!”
– Treasurer, Energy Company
58%
PwC has provided IPO services to 58% of all US IPOs with
IPO market values over $5 billion*
*US IPOs with IPO market values greater than $5 billion from 1.1.2011 - 12.31.15
Selected PwC Non-Audit Client IPOs
Below is a representative list of non-audit clients where we have provided IPO services during the IPO process.
Client
Sector
Deal Size
F
Client
Sector
Deal Size
$1,271 MM
T
C
$893 MM
REIT
Client
Sector
Deal Size
$480 MM
I
$232 MM
E
$385 MM
C
$163 MM
$825 MM
E
$330 MM
T
$114 MM
T
$700 MM
C
$319 MM
I
$102 MM
C
$650 MM
I
$315 MM
I
$82 MM
F
$565 MM
F
$308 MM
HC
$56 MM
Selected PwC Audit Client IPOs
Below is a representative list of audit clients where we have provided audit, audit related and certain IPO services during the IPO process.
(Note, we cannot provide all of the services listed in this brochure to our audit clients or clients with independence restrictions.)
Client
Sector
Deal Size
T
Client
Sector
Deal Size
$21,767 MM
I
I
$957 MM
REIT
Sector
Deal Size
$190 MM
HC
$96 MM
REIT
$180 MM
C
$95 MM
$560 MM
C
$174 MM
HC
$91 MM
E
$459 MM
HC
$139 MM
HC
$90 MM
C
$360 MM
HC
$134 MM
T
$78 MM
C
$333 MM
HC
$127 MM
HC
$72 MM
F
$332 MM
HC
$126 MM
HC
$65 MM
I
$315 MM
C
$124 MM
HC
$65 MM
E
$281 MM
HC
$97 MM
HC
$55 MM
Legend: Consumer (C), Energy (E), Financial (F), Healthcare (HC), Industrial (I),
Real Estate Investment Trust (REIT) Services (S), Technology (T)
Client
Navigating your IPO: How PwC can help | PwC
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PwC’s IPO services*
PwC’s thorough IPO services brings together
an integrated set of capabilities to help
companies as they prepare for the public
markets. The following chart illustrates
many of the areas an organization will need
to focus on to improve as the organization
embarks on the going public process and
transitions to operate as a public company.
Capital
Markets
Advisory
Accounting
and financial
reporting
Financial
planning
and analysis
Governance
and leadership
no
Tech logy
Corporate
Strategy and
development
Internal audit
and controls
IPO services
je
or
y
P
ro
Enterprise
risk
management
ct
Ma
Treasury
nagemen
v
t Ad
is
Tax
Executive
compensation
and HR
Internal controls & internal audit
Tax
Advise client relating to:
Advise client relating to:
• Client’s development of an internal audit function
• Client’s application of ASC 740—tax accounting and
disclosures
• Client’s evaluation of internal audit co-source and
outsourcing solutions
Advise client relating to:
• SOX readiness assessment and development of a
remediation plan, if needed
• Internal control documentation, internal control testing
and development of its CEO/CFO annual and quarterly
certification process
* PwC may not be able to provide all of these services to PwC audit clients or
Client’s with independence restrictions.
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Navigating your IPO: How PwC can help | PwC
• Client’s application of Foreign Account Tax Compliance
Act (FATCA)
• Client’s tax department organizational design, tax
processes and controls
Accounting and financial reporting
Capital markets advisory
• Advise client in its development and its preparation of
SEC financial statements and disclosure
Advise client relating to:
• Advise client in its development of MD&A, summary/
selected financial data, capitalization/dilution tables
and other financial data in a registration statement,
prospectus or offering memorandum
• Advise client in its improving its finance organization,
close process, general finance and accounting processes
and management reporting
• Advise and assist client with its documentation,
identification and advise client on its resolution of
critical, complex and judgmental accounting issues
and policies
• Advise and assist client with its development of
responses to SEC comment letters
• Advise and assist client with its development of Article
11 pro forma support schedules with client’s financial
data and client’s pro forma adjustments
Financial planning and analysis
• Advise client on improving its budgeting, planning and
analysis function and related processes
Executive compensation & HR
Advise client relating to:
• Benchmarking, program planning and design of client’s
executive compensation processes
• Client’s preparation of compensation and
governance disclosures
• Client’s HR systems and processes
• Development of its IPO story and identification of KPIs
• Identification of methods to increase and improve value
• Identification of client’s comparables
• Client’s advisor selection process including
underwriters, research analysts, exchange
• Client’s analyst and roadshow presentations
Project management advisory
Advise client relating to:
• Development of flexible and scalable project
management solutions
• Development of its project governance structure, communication framework and status reporting mechanism
• Development of its readiness assessment, timelines and
project plans
• Development of an issue resolution framework and
organization around complex workstream structures
• Options to accelerate its IPO closing process
Treasury
Advise client relating to:
• Development of its treasury strategy
• Improving its bank and cash management infrastructure
• Selection and implementation of its treasury systems
and processes
Corporate strategy & development
Enterprise risk management
Advise client relating to:
• Advise client with its implementation of risk
management framework and processes
• Improvement of its capital structure and evaluation of
financing alternatives
Advise and assist client relating to:
• Client’s development of its strategic plan to increase value
• Evaluation of its risk management assessment and
evaluation of capabilities
Governance & leadership
• Client’s development or refinement of its risk
management framework
Advise client relating to:
• Client’s new governance requirements
• Client’s board and audit committee composition
• Development of its charters, bylaws and
whistleblower program
* PwC may not be able to provide all of these services to PwC audit clients or
Client’s with independence restrictions.
Navigating your IPO: How PwC can help | PwC
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Our insights
From keeping abreast of the capital raising landscape, improving M&A processes to increase deal value, understanding
how to help advise on executing an IPO and evaluating exit strategies, PwC’s Deals Practice brings you research and
insights on the business issues that matter. To keep abreast of the latest in capital markets, sign up for our Capital
Markets Watch weekly mailing list by emailing [email protected]
Download these publications and more at: pwc.com/us/deals/publications
www.pwc.com/ipocentre
‘Equity sans frontières’
Trends in cross‑border IPOs and an
outlook for the future
November 2012
An IPO centre publication,
helping companies assess
their choices
www.pwc.com/us/deals
www.pwc.com/us/ipo
Which market?
Roadmap for an IPO
A guide to going public
A guide for companies
considering an initial
equity listing in New York,
London or Hong Kong
September 2012
A publication from
PwC’s Deals practice
At a glance
The process of selecting
the most appropriate
exchange for your
business to list its shares
is challenging and
complex.
November 2011
Understanding the
differences among
global exchanges and
determining the
exchange that best fits
the unique needs of your
business are key aspects
of a successful listing.
Working closely with
an advisor can help
anticipate business risks
and develop programs to
manage these risks early
in the offering process.
10
Navigating your IPO: How PwC can help | PwC
PwC US at a glance
80+
PwC provides
advisory service to
93%
of Fortune 100 companies
PwC provides services to more than
locations
PwC ranked
#1
Most powerful professional
services brand by Brand Finance
80%
of the world’s top 50 private equity
firms on the 2015 Private Equity
International’s (PEI) 300 ranking
Revenue mix
40% Assurance | 32% Advisory | 28% Tax
US$12+ billion
revenues for fiscal year 2015
PwC audits more
Fortune 100 and 250
Companies than any other firm
Sources include: Fortune, 2015 Private Equity International’s (PEI) 300
ranking, Brand Finance 2015, Financial Times Global 500
49,000+
people
PwC firms provided services to:
418
Fortune Global
500 companies
443
FT Global
500 companies
150 countries
In our global
delivery network
Navigating your IPO: How PwC can help | PwC
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pwc.com/us/ipo
Contact the PwC Deals Practice
For a deeper discussion about IPO services please contact one of our practice
leaders or your local Deals partner/managing director:
Henri Leveque
Partner, Capital Markets and Accounting
Advisory Services Leader
Atlanta
(678) 419 3100
[email protected]
Neil Dhar
Partner, Capital Markets Leader
New York
(646) 471 3700
[email protected]
Mike Gould
Partner, IPO Services Leader
Chicago/Los Angeles
(312) 298 3397
[email protected]
David Ethridge
Managing Director, IPO Services Leader
New York
O: (212) 845 0739
M: (973) 615 1091
[email protected]
Tracy Herrmann
Partner
Houston
(713) 356-6583
[email protected]
Tom Ouimette
Partner
Chicago
(312) 298 3822
[email protected]
Alan Jones
Partner
San Francisco
(415) 498 7398
[email protected]
Michael Poirier
Partner
Boston
(617) 530 5573
[email protected]
Daniel Klausner
Managing Director
New York
(646) 471 5388
[email protected]
Derek Thomson
Director
New York
(646) 471-2041
[email protected]
Carina Markel
Partner
Chicago
(312) 298 3627
[email protected]
Jason Waldie
Partner
Dallas
(214) 754 7642
[email protected]
Bruce McAdams
Managing Director
Los Angeles
(213) 356 6549
[email protected]
Marshall Yellin
Managing Director
Washington, DC
(703) 918 3439
[email protected]
Jason Natt
Partner
Miami
(305) 381 7651
[email protected]
Robert Young
Partner
Philadelphia
(267) 330 3301
[email protected]
Michael Niland
Partner
Atlanta
(678) 419 3586
[email protected]
© 2016 PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC refers to the United States member firm, and may sometimes refer to the PwC
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