Assembling the IPO Team: Tips for CFOs

By Robert Half on February 6, 2020 at 8:30am

The decision to go public is a significant turning point for a fast-growing company — and its CFO. As a business moves from being a private company or startup to operating as a publicly traded company, a major cultural shift is inevitable. Pivoting to new rules, processes and technologies will most certainly require restructuring and, more than likely, expansion of the current financial team.

The CFO is largely responsible for laying the groundwork for an initial public offering (IPO), and ensuring the organization has not only a strong financial team but also, the right financial infrastructure to make this major transition successfully. As explained in the Guide to Public Company Transformation from Protiviti, a Robert Half subsidiary, the failure to fully develop sound business processes, controls and infrastructure, particularly those that support financial reporting processes, is one of the most common mistakes companies make in their public company readiness effort.

The CFO can’t manage the IPO process alone, of course. And if the finance function is staffed too leanly, as is often the case in startups, there is a real risk that the function may not be able to handle the high workloads and intense deadline pressures that accompany an IPO. The failure to keep pace with these demands could, in turn, impact the company’s valuation. Protiviti’s guide emphasizes that “the successful path to public company readiness requires striking the right balance between IPO preparation and the performance of day-to-day business operations.” The guide also notes that effective project management is essential.

A critical step on the IPO path is building a strong back office

For these reasons, many finance leaders at startups and fast-growing companies make the strategic decision to add highly skilled and experienced consultants to their IPO team. Often, they choose to engage these specialized resources through managed business services arrangements.

“When a fast-growing company pursues an IPO, CFOs need to ensure that the finance function can effectively manage the ebbs and flows in workload that will occur throughout the process,” says Jason Flanders, executive director for Robert Half Management Resources. “Using a variable labor model before, during and after the IPO is the approach many organizations choose.”

Robert Half, in collaboration with Protiviti, provides this type of solution through Managed Business Services. Protiviti delivers expertise to companies in areas such as accounting, finance, business performance, analytics, risk and compliance, while Robert Half provides specialized operational resources where and for as long as needed.

“A variable labor model is a simple, flexible staffing strategy that allows businesses preparing for an IPO to align the requisite resources they need for as long as they need them,” says Flanders. “These resources can also help the CFO strengthen the back office so that it can handle revenue surges and other sudden changes that are likely to occur as the company continues to grow and evolve.”

Flanders suggests that CFOs take stock of their team’s abilities and experience at least a year before the planned IPO, so they can identify skills gaps and determine where the finance function needs more support. He also offers the following three tips for CFOs who are working to assemble an IPO team:

1. Take a long-term view of staffing needs, including leadership roles

Post-IPO, the CFO spends much less time managing day-to-day financial operations than he or she did when the company was private. CFOs should expect to have an expanded leadership role in which they will be responsible for handling a diverse range of high-level activities including strategic and operational decision-making, monitoring risk and compliance issues, identifying value-adding activities for the business, overseeing big data initiatives, and helping to drive innovation in the finance function.

It is therefore wise for CFOs to consider — and budget for — future staffing needs while the company is still in the pre-IPO stage.

For example, the business likely will need to hire a controller and other trusted high-level finance professionals who have deep knowledge of forecasting and budget planning, automated finance and accounting systems, U.S. Securities and Exchange Commission (SEC) regulations, complex tax codes and reporting, and financial compliance mandates, such as Sarbanes-Oxley (SOX). Work that is related to the latter mandate helps to shape the company’s governance, risk and compliance capabilities, which Flanders says must be “airtight” before the IPO.

The business can benefit from staffing some of these senior-level financial roles, like the controller position, sooner than later, however, because they can provide much-needed support in the pre-IPO phase. As Flanders explained in a recent blog post, engaging interim management resources can be a quick path to bringing in financial leadership to help the business “execute on day-to-day operational accounting, while the CFO is working closely with senior leadership on strategy.”

Looking for highly skilled, interim management resources? We can help. Learn more.

2. Don’t overlook the vital connection between finance and IT

Protiviti’s Guide to Public Company Transformation says that “an organization’s ability to conduct accurate, timely and effective financial reporting and regulatory compliance hinges on the strength of applications and systems infrastructure.” However, IT infrastructure is an area commonly overlooked in the public company readiness process, the guide explains.

Companies pursuing an IPO can avoid this misstep by bringing in specialized consultants, either on a project basis or through a managed business services arrangement, to review the company’s IT system environment to ensure the right software is in place — and that the system itself can scale to support the business as it grows. These resources can also assess whether the IT function itself requires transformation.

Specialized consultants can evaluate and implement enterprise resource planning (ERP), customer relationship management (CRM) and other essential business systems that the organization will need to operate efficiently after the IPO. However, while external resources can provide valuable insight and guidance on these areas, effective collaboration between finance and IT is essential for turning recommended changes and improvements into realities for the business, Flanders says.

3. Lean on experienced advisers — and look to peers for insight

Corporate governance, risk management, and regulatory concerns are just some of the top-of-mind issues for CFOs when the company is getting ready to go public. Long- or short-term finance and accounting consultants can help ease the burden on CFOs by preparing accurate and reliable IPO documents, establishing an investor relations program, setting up internal audit processes, and more.

There are other critical resources that CFOs likely will need to align for the company to execute a successful IPO. Legal advisers, underwriters, accounting companies and audit firms are just some examples. However, because CFOs need to join the CEO in a pre-IPO roadshow and oversee completion of Form-S1 IPO registration documentation, they don’t have much time to devote to these important tasks. That’s why many choose to bring in an IPO adviser to handle everything from selecting bankers to negotiating deals with stock exchanges.

Many CFOs — especially those going through the IPO process for the first time — also look to their peers for wisdom and guidance. “This often includes gathering tips on how to help the business, and its employees, manage through the change that will result from one of the most significant business transformations the company will ever experience,” says Flanders.

Increasingly, finance leaders are turning to their peers for suggestions on how to lay the groundwork for effective environmental, social and governance (ESG) reporting, Flanders says. ESG efforts could potentially impact an organization’s IPO valuation and long-term market value. And it’s an emerging trend that business leadership at pre-IPO companies should monitor, as this recent Protiviti blog post explains.

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