Companies that have successfully listed on a stock exchange never forget that defining moment: the ringing of the bell. While it’s a historic event in any company’s growth story, it’s also one that requires significant work and commitment, according to RSM Australia.
An initial public offering (IPO) is a significant step for a company to take. While it can assist in raising capital for growth and other initiatives, it also attracts increased requirements around compliance, reporting and due diligence. To determine whether an IPO is the right approach, it is important to seek expert advice to ensure a thorough understanding of the IPO process, the responsibilities of directors, and the risks and costs involved.
There are four key factors to consider in the lead-up to an IPO:
Successful IPO candidates can take up to two years to complete the IPO, with a significant amount of time spent navigating financial and reporting issues, developing business processes and infrastructure as well as appointing the right executive and advisory team. It’s key to have a strong team of advisers including legal advisers and a financial team made up of transactions, audit, and taxation experts.
The advisory team can make the difference between a smooth, seamless listing or a protracted and difficult process.
Once the team is in place, due diligence can begin, which is an important part of preparing the prospectus. There is no legal requirement to conduct a due diligence process when preparing a prospectus. However, it has emerged as a market practice for issuers seeking to mitigate the risk of future liability from a poor-quality prospectus, and to ensure that the prospectus includes all information necessary to make an informed investment decision and is not misleading.
A successful listing means increased capital, but also attracts a new regulatory framework and ongoing reporting requirements which may prove to be administratively burdensome.
During the preparation phase, it’s essential to focus on tax structuring to work out business benefits from any concessions and understands the implications of different structures.
The following tax issues need to be considered:
It’s key to start by confirming that an IPO really is the right move for the business. While it’s a highly viable avenue through which to raise capital, it’s clear there are onerous requirements around compliance, reporting, and due diligence.
Glyn Yates, national head of corporate finance, RSM Australia