Tips for securing a successful IPO

If you are considering floating your business, it will be vital to get your house in order well in advance of the IPO. This will ensure that the business is suitable for admission, as attractive as possible to potential investors, and will make the IPO process as smooth as possible, avoiding any nasty surprises along the way. Good record-keeping is essential as you will be required to verify the contents of each of the key documents and announcements published by your business in connection with the IPO.

You should ensure that your accounts are in good order, with three years of audited financial information normally being required (with some exceptions on AIM).

You should also make sure that you choose the right market. Businesses seeking an IPO have a choice of multiple listing venues in the UK, including AIM and the Main Market, which all have different requirements regarding, for example, free float, market capitalisation, trading history, corporate governance and ongoing compliance.

You should also ensure that you appoint the right advisers, including financial advisers, legal advisers and reporting accountants. Companies floating on AIM are required to appoint a nominated adviser to ensure that the company is suitable for AIM and to ensure that the AIM Rules are complied with from admission.

Key legal issues to be considered before the IPO process is initiated include:

Pre-IPO reorganisation – ensure that the business owns or has the right to use all relevant assets. Is a corporate reorganisation required before the IPO?

Contracts – do any of the material contracts of the business contain change of control provisions which would be triggered by the IPO? Are all key contracts documented
clearly? It is necessary to formalise any informal arrangements that are material to the business. Are there any key contracts which will come up for renewal during the IPO process? If so, should any renewal be accelerated?

Intellectual property – are all intellectual property rights owned or used by the business properly protected/ registered/ licensed?

Management and employee incentivisation – do directors and key employees have written contracts setting out the terms and conditions of their employment? Do they include appropriate non-compete provisions? These contracts will need to be in a form suitable for a publicly quoted business – a company with the appropriate management and other systems in place is likely to be more attractive to investors. Is there a share scheme? You may consider establishing a new employee share scheme to incentivise employees to stay on. Having a strong management team in place following the IPO will be key for an investor.

Shareholder rights – if the business is incorporated, are there any outstanding pre-emption rights over any of the company’s shares? Is there a shareholders’ agreement in place governing the terms of any IPO?

Disputes – any ongoing legal disputes (for example, with customers, suppliers or employees) need to be resolved before the IPO process begins.

Applicable laws and permits – ensure the conduct of the business complies with all applicable laws and that all necessary licences and permits have been obtained and are up to date.

Property – ensure any property contracts are properly and clearly documented.

In our experience, the sooner you start planning, the smoother the IPO process will be. If you are considering an IPO, we would be very happy to have an initial meeting with you to discuss these issues at no charge, so please do get in touch with a member of our Equity Capital Markets Team.

Download the information pack here.