Should you go public?

• Author: Ferling, Rhona L.
• Position: From FEI

Thinking about taking the plunge and going public? Then you'd better realize that "it's the largest single distraction that your management team will ever face," says William Sarther, CFO of i-STAT, a company that became public in February 1992. Sarther was part of a three-person panel, moderated by Lawrence C. Best, senior vice president of finance and administration at Boston Scientific Corp., on the issues involved in becoming a public company at FEI's Current Financial Reporting Issues Conference. All three panelists say that the number one reason for going public is access to the capital markets. That's a very strong draw for most companies, they say, but the transition from private to public is fraught with daunting shareholder, legal, accounting, reporting and compensation issues.

But armed with the right fore-knowledge, you can take certain steps to help the IPO process move along more smoothly, Sarther says. First, make sure you strengthen any weak links in your management team as soon as possible, he advises. And when you assemble the team of professionals that will help take your company public, choose "people who know your competitive landscape quite well," he adds.

Since your objective is to compete effectively for capital, you should also know your growth capabilities and what distinguishes you from other competitors. Understanding your marketplace well will help you, too, Sarther notes,especially when you're trying to decide whether to make your stock institutional or retail. "Talk to the underwriters -- interview them and find out what their strengths are," he says.

After you publish your prospectus, be prepared for a tidal wave of phone calls from researchers. And don't take them lightly, Sarther warns, because at this point, "It's the researchers who will propel you forward. They're the ones writing about you, and they have the ability to make your stock go up and down," he explains. Therefore, it's in your company's best interest to give the researchers the most accurate, comprehensive information possible.

Also, a well-organized, impressive road show, in which you try to interest investors in your stock, "absolutely makes the difference," Sarther says. "Don't hem and haw; a polished presentation and how you handle yourself in front of investors makes a big difference," he stresses.

That's good practice for being in the public eye, because once your company becomes public, you'll have to spend about 25 percent of your...