How well rehearsed are you for the public stage? Steps to consider before issuing an IPO

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1 How well rehearsed are you for the public stage?

2 Going public involves intense scrutiny and analysis from investors and the competitive marketplace. As a part of an initial public offering (IPO), you need to create a compelling story that acts as a tool that facilitates the sale of the company s stock to prospective investors. The story needs to include growth plans, governance, corporate structure and accounting standards alignment.

3 What are your future plans? A company s past and future outlook are vital to a successful IPO. To begin building your IPO story, you ll need to review the past five years of the business and account for all of the ups and downs, demonstrating the company s progress and performance. The story should include the forecasted outlook for the next five years, which is typical for future projections. When evaluating your outlook, it helps to include your long-term plans, including new services, products or innovative growth plans. These pieces demonstrate to investors and the market the company s stability, and provide a greater reason to accept and support the IPO. Valuation The company s market valuation is a key component in the preparation to go public. The valuation is an indicator of how the company will be received by investors and stakeholders. If it s weak, there may not be sufficient interest in the offering, and the stock is unlikely to be traded once on the public market. Checklist Business performance review of the past five years Forecasted outlook for the next five years Audit of three years financial statements Comparative analysis Another important step in preparing the valuation is to conduct a comparative analysis of public companies with similar products or services. This analysis will aid in demonstrating if the market is ready for a company and showing where adjustments may need to be made to increase the likelihood of success. The analysis will include reviews of financial statements, operational structure board of directors composition and year-over-year growth, all which create the foundation for a compelling company story. 1

4 Governance and corporate structure It s important to complete a thorough review of the board of directors, if you have one in place. If you do have a board, it s important to indicate if there are any upcoming changes, or dissention among the members against an IPO. If a board is not in place, you ll need to activate one and ensure an adequate amount of time passes before issuing. Activating a board can take some time, and you ll want to conduct a proper search for the right board members with the right experience. In addition to a board of directors, it s also important to demonstrate a strong and stable corporate structure. Ask yourself the following: Will the structure be able to withstand the demands and growth anticipated as a public company? Are any changes necessary before moving further along the IPO journey? Timing and market readiness As the saying goes, timing is everything. A company could have everything lined up and ready to go before moving forward, but if the timing is off and the market isn t ready, the efforts could be in vain. To establish market readiness, you must first evaluate if there s an appetite for your type of company, and if the market is ready to accept an IPO. Key items to consider include: Market up- and downturn Current risk appetite (i.e., investors readiness to purchase stock) It isn t unusual for economies to be flush with cash while waiting to see how the market reacts for a period of time before investing. The timing of issuing an IPO isn t just dependent on the market analysis. You need to pay attention to other possible IPOs and market activity happening around the proposed issue date you re considering. If the timing isn t right, risk appetite is low or the economy isn t in the best position, you would be wise to wait until conditions improve to increase the likelihood of success. 2

5 Is your private company ready? Going public is a landmark decision for any company. So many pieces need to fit together: a compelling story must be told with a perfect storm of the right timing, the right economic conditions and the right financing. All of these are essential when issuing an IPO and maintaining long term success. Having all of these key elements secured and primed before moving forward will strengthen your story. If just one piece falls short, the whole IPO could be in jeopardy of falling apart. 3

6 A checklist for telling a compelling IPO story Company history in good account Audit of 3 years financial statements Market valuation of the company Successful growth plans forecasted Board of directors established and in support of IPO A solid corporate structure Market readiness assessment 4

7 We can help To learn more about how our Private Client Services professionals can help you navigate the IPO process and help get you ready for the public stage, contact us at Visit us at ey.com/ca/private. 5

8 EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com/ca Ernst & Young LLP. All ights eserved. A member firm of Ernst & Young Global Limited ED None This publication contains information in summary form, current as of the date of publication, and is intended for general guidance only. It should not be regarded as comprehensive or a substitute for professional advice. Before taking any particular course of action, contact EY or another professional advisor to discuss these matters in the context of your particular circumstances. We accept no responsibility for any loss or damage occasioned by your reliance on information contained in this publication. ey.com/ca