What are you going to sink money into ahead of an IPO? To start, you can expect to spend on bits and bytes.
Ernst & Young just surveyed 26 companies that went public from 2009 to present, and the findings included where the expenses associated with an IPO were allocated. Some expenses are utterly predictable and universal, while others may surprise you. Let’s take a closer look:
1. The obvious: 100 per cent of the companies reviewed hired investment bankers, auditors, attorneys and stock exchanges.
2. Dead tree: 96 per cent of companies going public hire a printer.
3. High tech: you need to put your best foot forward when going public. For many companies, that means new IT systems and other technology that increase efficiency and improve operations. 80 per cent of the company’s E&Y reviewed made investments in tech, with 60 per cent investing in an equity software package and 25 per cent in ERP.
3. Risk management: an IPO opens you up to a whole new level of risk … which is probably why 92 per cent of companies going public worked with a D&O insurance carrier.
And here are the rest:
4. Stock transfer agent: 84 per cent
5. Sarbanes-Oxley consultant: 76 per cent
6. Compensation advisor: 72 per cent (28 per cent hired one for the board of directors)
7. Investor relations firm: 68 per cent
8. Tax advisor: 60 per cent
9. Roadshow consultant: 40 per cent
10. Internal audit advisor: 12 per cent
So, what does this all add up to? $13 mn in one-time advisory costs related to the IPO. Nobody said your exit strategy would be cheap!