In the slowest IPO market since 2009, companies underscore market uncertainty and building the right team as major roadblocks to IPOs
NEW YORK, July 12, 2016 /PRNewswire/ — A new Deloitte poll shows more than one-third of companies view timing the market as the biggest concern when considering an initial public offering (IPO).
Reservations about building the right team and business infrastructure ranked as the second leading concern. Overall, companies are optimistic IPO activity will increase over the remainder of the year.
The poll of nearly 3,000 executives across a variety of industries was conducted during a “Deloitte Dbriefs” webcast focused on the current market and legislative environment for IPOs. The webcast examined the significant burdens going public puts on companies along with recent improvements as a result of the JOBS Act.
Specifically, leaders from Deloitte’s emerging growth company and technology industry practices provided insights into how companies can navigate the increasingly complex IPO landscape, particularly in the face of residual economic uncertainty and volatility in the capital markets.
IPOs pivotal for expansion
“For emerging growth companies, IPOs are pivotal for expansion, and a poorly-timed offering can be incredibly difficult to overcome,” said Heather Gates, managing director and West region emerging growth company practice leader, Deloitte Services LP. “Investment bankers keep a close watch on overall market volatility to try to select the best time for a company to go public. Lower market volatility tends to produce better results and a greater number of IPOs.”
According to Gates, in addition to timing the market, more than a quarter (28.7 percent) of respondents ranked building the right team and business infrastructure as a major challenge. Having strong people, systems and processes in place that can withstand the rigors of the IPO process should be top of mind for companies.
“Companies can pave the way for success by focusing on accounting, financial, legal, business and systems matters at least 18-24 months in advance of going public. Often, companies wait too long to bring on a professional management team, creating a last-minute scramble that may result in missing opportunities and risking long-term success,” said Mohana Dissanayake, partner and audit technology industry practice leader, Deloitte & Touche LLP. “Assembling a strong business infrastructure, investing in the right finance personnel, and building the right team are crucial not only for the initial offering, but for establishing credibility in the eyes of investors in subsequent quarters.”
Executives also cited attracting the right investors and analysts (20.4 percent), and to a lesser extent, advance planning and early adoption (10.1 percent) as major challenges in their decision-making process. Despite the obstacles, more than 34 percent of respondents say IPO activity will increase moderately this year.
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