Investors are back: How your business could profit from a sharemarket float

But the appetite for new IPOs may not last long; it’ll depend on how successful the early movers in the Australian IPO market prove to be. “It could be a short burst, or a longer opening. The best companies will be ready to go public when the window does open,” Browning says.

“Do you want to be the first or last in a particular cycle? Well, that depends on whether or not you’ve done the hard yards yet. My advice to clients is not to go public too early. You need to invest time so that when you do go public, you’re ready for it.”

IPOs take a long time to plan for, meaning those who are ready to go later this year will have been preparing for months. Some companies take up to two years. This isn’t surprising when you consider all the things that need to be done to get a company ready for listing.

“In my experience, companies tend to underestimate how long it takes,” Browning says. “Running a good business as a private company, plenty of people think moving to a public company should come pretty easily. But it rarely works smoothly.”

The IPO itself can be highly distracting for management teams, not to mention employees. It takes months to prepare a prospectus and talk it through with potential investors. And that doesn’t stop once a company goes public. Instead, this new outward focus becomes the norm for the business.

Public companies also have to produce financial information in far more detail and far more regularly than private ones, which can take time to build into business operations.

An IPO checklist: What you need to succeed

• The institutional investors Ernst & Young surveyed were asked what parts of a company’s infrastructure they placed the most importance on when investing. They nominated the company’s financial reporting system (80%), robust corporate governance and compliance (79%) and well-developed risk management systems and internal controls (71%).
• Asked what were their top three concerns, the institutional investors answered the overpricing of stock at an IPO (85%), the issuer not having the right management (56%), and companies listing too young or too early in their life cycle (43%).
• Asked how companies could know if they’re at the right stage in their life cycle to list, Browning said that while there should still be further growth to come, companies should also be able to demonstrate revenues commensurate with similar companies they will be compared to. The company also needs to have the internal systems and management team in place to sustain further growth, as well as a robust business model able to account for different risks.

Source: Ernst & Young, Right team, right story, right price.

Myriam Robin is a journalist with LeadingCompany. You can follow her on Twitter at @myriamrobin This article first appeared on LeadingCompany.