IPO diagnostics

Listing on the stock exchange can bring great benefits to a company. However, before you start preparing for an initial public offering (IPO), you should consider your strategic goals.

In addition, you need to determine how ready your company is for an IPO and what actions you need to take to attract potential investors, increase the value of your business, and ensure compliance with the requirements for a public company.

An IPO diagnostic is a structured analysis of the level of readiness of a business to go public and operate as a public company. This process, in essence, involves engaging a consultant to conduct a comprehensive due diligence of your business.

The main areas of the diagnostic include:
  • financial reporting procedures and internal control system;
  • corporate structure and tax issues;
  • financial results for previous periods;
  • corporate governance.

The result of this process is a “roadmap” of the activities that need to be carried out in preparation for an IPO. Conducting an IPO diagnostic does not take much time. Depending on the specific case, this work may take three to six weeks to complete.

Scope of work within the framework of IPO diagnostics

Clear strategy and stable financial position
  • Vision and mission
  • Consistent strategic plan and business plan, budget, forecasts and performance management
  • A management team capable of implementing the strategy and managing a British public company
  • Confirmed financial results of previous years (audited financial statements for 3 years)
  • Credit history / credit rating
  • Dividend policy
Transparent structure
  • Transparent legal structure
  • Functional and flexible tax structure and tax compliance processes
  • Ability to operate as an independent organization and on market terms
  • Clearly defined and maintained accountability in the Group’s management structure
  • Management motivation and reward programs using company shares
Corporate governance
  • Composition and organizational structure of the Board of Directors
  • Independence and objectivity
  • Segregation of powers of the Chairman Board of Directors and CEO
  • Subcommittees (Audit Committee, Nomination Committee and Remuneration Committee)
  • Board of Directors’ Remuneration
  • Delegation of Authority (including matters falling within the exclusive competence of the Board of
  • Directors)
  • Reporting Procedures to the Board of Directors
  • Internal Audit Service
  • Risk Management Structure and Processes
  • Timeliness and Quality of Reporting
  • Reliable Internal Processes and Control Systems
  • Ability to Issue IFRS Reporting on Timely Basis
  • Ability to Monitor and Provide Information on Efficiency in a Timely Manner
  • Corporate Financial Policy and Treasury Process
  • IT Environment and Security
  • Transparency and Disclosure
  • Financial Reporting
  • Conceptual Principles
  • Accountability and Responsibility
  • Communication
  • Compliance with Regulatory Requirements and Control
  • Audit
  • Disclosure
  • Investor Relations
  • Reputational Predictability and Corporate Responsibility
Code of Conduct
  • Policy for Managing Risk of Illegal Activities
  • Business Ethics
  • Occupational Health and Safety, Environmental Protection, Corporate Social Responsibility

Advantages of IPO diagnostics

  • Allows to identify problems at an early stage and avoid last-minute “surprises”.
  • Gives management the opportunity to correct the situation in advance based on identified problems.
  • Promotes a more even distribution of work on preparing for the IPO, preventing the risk of falling into “bottlenecks”.
  • Minimizes disruption of the company’s current activities during the IPO process.
  • Helps reduce the time to market, thereby giving the company the opportunity to get into “market windows”.
  • Improves the level of understanding of the IPO process within the company.
  • The results of IPO diagnostics will help improve the perception of the company by the investment banking community, since they not only indicate the company’s readiness for listing in, but also indicate the steps that the organization has already taken in order to go on an IPO and become a public company;
    make the due diligence process simpler and more efficient

IPO diagnostics are a market best practice

  • The IPO market is highly competitive – investors have become more demanding and have high demands on companies’ readiness to go public.
  • The costs and efforts of preparing for an IPO pay off: for potential investors, everything that improves the structure and manageability of the company is important.
  • Compared to the total costs of listing, IPO diagnostics are not an expensive project.
  • Russell Bedford RCG’s experience working with companies planning to go public shows that IPO diagnostics are becoming a market best practice.

The earlier an organization starts operating as a public company, the greater the chances of success in an IPO.