Study finds similarities in successful offerings.

• Author: Marshall, Jeffrey
• Position: IPOS

A recent study of initial public offerings (IPOs) from Ernst & Young LLP has identified several similarities among companies that had successful IPOs and strong subsequent performance. These similarities include the age of the company (and its CEO), whether it has a global operation, breadth of investor support and transaction activity post-IPO.

The Ernst & Young IPO study--conducted by the Strategic Growth Markets practice--analyzed publicly available information on U.S. companies that went public from the beginning of 2006 to mid-year 2007 and immediately qualified for listing in the Russell 2000 Index. The characteristics of this group may be significant in understanding key components to a successful IPO.

"When it comes to undertaking an IPO, preparation is unquestionably the key to success in both the short term and the long term," said Maria Pinelli, Americas Director, Strategic Growth Markets, for E & Y. "Part of being prepared is to understand what the market responds well to, so that you can determine if you are, indeed, ready. The companies in our study, for instance, didn't just go public; they were immediately listed in the Russell 2000, which has been hitting record highs [in 2007]."

The importance of spending time before the IPO was underscored by several speakers at the MIT CFO Summit in Boston in November. Eric Sockol, CFO of Tech Target, a resource website for technology buyers, said companies need to be comfortable with the investment bank they choose, and with the...