Going public: requirements are greater than ever

Despite early signs that the 2011 IPO market might recover, including successful first-day performances from LinkedIn and Angie's List, the year ended flat.

Despite early signs that the 2011 IPO market might recover, including successful first-day performances from LinkedIn and Angie's List, the year ended flat.

Hotly-anticipated IPOs from Groupon and Zynga failed to live up to expectations and the long, hoped-for Facebook IPO did not materialize. Renaissance Capital found that roughly 70% of the companies that went public in 2011 were trading below their opening prices. Investors expecting strong returns were left largely disappointed, and scrutiny will be strong in 2012 from both investors and regulators.

Over the next year, several companies are expected to go public, including the Carlyle Group, Toys-R-Us, Yelp, and, potentially, Facebook – a move that could stoke additional demand for IPOs. According to Dealogic, the current backlog of companies hoping to go public stands at 148 deals.

It is now more challenging than ever to go public due to greater disclosure requirements and regulatory scrutiny. Going public is a labor-intensive activity; to meet these demands and attract investors, companies need to intensify efforts to demonstrate their long-term viability and strategic acumen. One important tool companies can deploy to get over this hurdle is a strong communications program.

At Hill+Knowlton Strategies, we counsel clients at the three lifecycle phases of going public, including pre-IPO, “ringing the bell,” and post-IPO. Each phase has distinct communications requirements, and companies need to develop programs to help ensure a successful public offering.

Pre-IPO: Before a company goes public, it is critical to develop messaging that will resonate with institutional and retail shareholders. In addition to having PR and IR experts provide their expertise, conducting research with potential investors is another useful tool that PR firms provide to help bullet-point messaging. Previous experience with taking companies public is another one of the key benefits that PR firms provide.

Ringing the Bell: The day of going public involves a great deal of tactical execution and messaging to key media.

Post-IPO: Once a company has gone public, the work does not stop. Requirements for supporting quarterly earnings and financial reporting are rigorous. It is also essential to constantly re-evaluate a company's messages to ensure that they resonate with market trends and investors. Shareholder perception audits are a useful tool to shape this messaging. Additionally, going public creates significant internal change, making internal and change communications valuable.

We believe that 2012 will be another challenging year, especially for companies looking to go public. Having a rock solid communications plan is one aspect that cannot be overlooked.

Claire Koeneman is EVP and head of US financial communications at Hill+Knowlton Strategies.

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