The global initial public offering (IPO) momentum has shown no signs of slowing, fueled by liquidity in the system and a robust global equity market performance. Asia Pacific (APAC) has remained a growth hotspot, with the region accounting for 44 per cent of international IPO activities in 2021.
Companies in Southeast Asia raised a record US$4.9 billion through IPO activity in the first half of the year. This number is poised to climb even further with the realisation of several ambitious deals in the pipeline, including the US$1.5 billion IPO by Indonesia e-commerce giant Bukalapak in July and other planned blockbuster IPOs by Grab and the GoTo group.
While many in the region may be raring to follow in the footsteps of these giants, the road ahead as a public company will not come easy.
Going public entails a company’s financial statements being subjected to rigorous scrutiny from various entities, with little room for error. Startups who have conventionally prioritised innovation, business development and go-to-market activities may find themselves inadequately prepared to handle the new requirements as a public company.
Without a finance and accounting (F&A) function that is in order, transparent, and ready to scale, companies could face delays in the IPO timeline. Moreover, financial figures that do not stand up to the test may negatively affect brand reputation and investors’ confidence in the company’s economic performance.
Gearing up before taking the leap
Before plunging head-first into the public spotlight and scrutiny, startups should strive to manage their internal processes as if they are already a public company.
From an F&A perspective, this means meeting reporting deadlines and keeping up with the internal controls testing to deliver an accurate, reliable and timely close consistently.
Also Read: As IDX commissioner, this is how Pandu Sjahrir aims to help more Indonesian startups go public
Startups can use these four steps to maximise their IPO readiness:
Take stock before selling your stock
Going public means that past and present financial records will be made available in the public domain. Any historical accounting issues will need to be addressed and aligned with the Singapore Financial Reporting Standards (SFRS) or the regulations in the country you intend to list early on to avoid roadblocks in the IPO process ahead.
Companies must engage relevant experts to identify any accounting issues and address them swiftly before being subjected to intense scrutiny from the public.
Evaluate your people
Getting the IPO and functioning as a public company is hard work, and companies would most likely require additional capacity and resources to keep up with the new requirements.
Planning to identify and fill any talent gaps, either by hiring new talent, outsourcing work or conducting training internally, would be essential in preparation for the IPO. In particular, revenue recognition, SEC reporting and general technical accounting are some of the most profound skill gaps that need to be addressed.
Invest in scalable processes
Companies will need robust systems to handle growing transaction volumes, and accounting complexities as the business evolves.
Before an IPO, it will be crucial to evaluate systems put in place for billing, expense reporting, stock administration, procurement and close management against the new requirements of the business.
Strengthen internal controls
Internal controls are the policies, procedures and processes established by the Board of Directors and senior management. They are meant to assure the institution’s operations’ safety, effectiveness and efficiency, the reliability of financial and managerial reporting,g and compliance with regulatory requirements.
It would be wise to implement new processes and systems early on as it will take time for everyone within the organisation to get used to the recent changes.
As a public company, stakeholders and customers will have expectations about the company’s growth, financial results and ethical behaviours.
Having comprehensive controls in place sets the stage for good business practices and enables better decision-making, increasing confidence for all parties.
Business owners must spend time understanding the controls in place and evaluating whether they are sufficient to mitigate risks posed to the organisation as it grows.
Also Read: What does Peter Thiel-backed Bridgetown’s IPO mean for SEA’s startup ecosystem?
Building solid foundations early will go a long way
Going public is an exciting milestone for any company and especially significant for startup founders who have invested massive amounts of time and energy into building a company ready to be listed on the stock exchange.
However, business owners need to recognise that getting an IPO is not the end goal but the beginning of an incredible journey ahead.
To move forward as a successful public company, it would take more than a great product or service offering, but also expert management of a host of undertakings, such as paying attention to reporting and control requirements and handling increased scrutiny from shareholders, the government, regulatory bodies, customers and the media.
It will be of utmost importance for companies to start early and build solid foundations in their people, processes and controls to set themselves up for success as a public company.
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