Planning now for a 2010 IPO.

• Author: Storero, Jane K.
• Position: Initial public offering

Market conditions contributing to declining numbers of companies going public last year are expected to last through this year. Raising capital to fund operations and grow through the public capital markets could return in 2010, and it's never too soon to start preparing for an initial public offering now.

United States public companies have been subjected to unprecedented regulatory scrutiny as a result of the economic crisis. They have also been contending with significant declines in the value of U.S. equities; scandals involving various investment vehicles and their promoters; and the failure, bailout or forced mergers of a number of household-name financial institutions. The situation has ushered in what could be a tidal wave of new and even more regulatory requirements.

In this environment, the number of U.S. companies going public declined substantially last year and is anticipated to remain extremely low this year as well. Further, over the past five years, a significant number of U.S. public companies have opted to become private.

As such, a company considering undertaking an initial public offering (IPO) needs--besides a solid product, business model and management team--to be well-prepared to enter this enhanced regulatory environment and heightened scrutiny in the world of public companies.

In addition, a great deal of preparation and planning is necessary for a company to complete a successful IPO. Preplanning now--while markets are less favorable--is essential when contemplating going public to be ready to move forward quickly when the public equity markets open up again, which may not occur until 2010 or beyond.

The 10 steps described below are necessary prior to embarking on a traditional IPO or going public through less traditional means, such as a reverse merger or a merger into a public shell. The importance of being prepared to go public when the IPO window opens again can not be understated.

1 Assemble an Experienced Professional Team.

The IPO process is subject to a complex set of laws, rules and regulations at the federal and state level, including those of stock exchanges. Once a company has completed a public offering, it is subject to additional requirements and responsibilities.

Thus, the organization needs to assemble a legal team that can address all of its securities and public company needs--as well as related legal issues, such as fax, environmental, intellectual property, litigation, the Employee Retirement Income Security Act of 1974 and employment.

The firm must also engage an accounting firm registered with the Public Company Accounting Oversight Board. Those on the professional team should be well versed in the legal and regulatory requirements applicable to public offerings and public companies well in advance of the organizational meeting.

2 Assemble a Management Team with Public Company Experience.

Once the IPO is completed and the company's stock is traded on an exchange, it will be subject to U.S. Securities and Exchange Commission reporting and accounting requirements as well as a variety of stock exchange rules and requirements.

Thus, a firm seeking to go public needs to begin assembling a skilled management team...