Raising capital in equity markets

Going public can bring numerous benefits to your company. However, before you start to prepare for an initial public offering (IPO), you should consider your strategic objectives.

You must also determine to what extent your company is ready for an IPO and what steps need to be taken in order to be perceived favourably by potential investors, increase the value of the business, and be able to operate as a public company.

IPO diagnostic is a structured way of analysing and reporting on a company’s readiness for going public. It is essentially hiring an advisor to do due diligence on yourself.

Key areas of a diagnostic include:

• Financial reporting procedures and internal controls
• Corporate structure and tax considerations
• Financial track record
• Corporate governance

The output is a roadmap of what needs to be addressed during the IPO preparation process. The project does not take long; depending on each particular case, it takes about 3-6 weeks from start to finish.

Standard scope of IPO diagnostic

Clear strategy and stable financial position

• Vision and mission
• Integrated strategic and business plan, budgets, forecasts and performance management
• Appropriate management team to execute the strategy and run a public company
• Proven financial track record (3 yrs audited financials)
• Credit history/rating
• Dividend policy

Transparent structure

• Established transparent legal structure
• Functional and flexible tax structure & tax compliance process
• Ability to function on stand-alone and arms-length basis
• Defined and respected group management reporting lines
• Executives motivation & remuneration including share incentives

Corporate governance

• Composition and organisation of the Board
• Independence and objectivity
• Separation of Chairman of the Board and CEO
• Size of the Board
• Sub-committees (e.g. Audit, Nomination and Remuneration, if applicable)
• Board remuneration
• Delegated Authority (incl. reserved matters for the Board)
• Board reporting procedures
• Internal Audit function
• Risk management framework and process

Timely and accurate reporting

• Robust internal processes and controls
• Ability to produce timely IFRS reporting within required time-frame
• Ability to monitor and report KPIs on a timely basis
• Corporate Treasury policy
• IT environment and security

Transparency and disclosure

• Financial reporting
• Framework
• Accountability & responsibility
• Communication
• Compliance and monitoring
• Audit and Assurance
• Disclosure
• Investor relations

Reputational predictability and corporate citizenship

• Code of conduct
• Framework
• Fraud risk management policy
• Health and safety, social & environmental obligations

Benefits

• Allows early identification of issues to avoid last minute surprises
• Gives management a chance to remediate findings
• Distributes the workload more evenly to avoid bottlenecks
• Minimises the disruption to the company’s business during the IPO process
• Helps accelerate time to market by positioning a company to take advantage of “market windows”
• Improves the company’s IPO expertise
• The IPO diagnostic report assists in marketing the company to investment bankers:
  • It allows the company to not only show its preparedness, but also to demonstrate the actions taken to position the company for both an IPO and for being a public company
  • All of this assists and streamlines the investment bankers’ due diligence process

It pays off

• It is a highly competitive market for IPOs – investors are more selective and want the highest quality deals. Preparation and quality are worth the effort – everything that improves a company helps
• Compared to the total listing costs and value received, an IPO diagnostic is inexpensive
• Based on PwC recent experience with companies planning to list, completing an IPO diagnostic is becoming market best practice
• The sooner you start to look and act like a public company, the better

We provide services either as an advisor to management and owners, or as an independent auditor responsible for providing opinions and verifying financial information in the prospectus.

Some of our services are as follows:

• Support in converting financial statements to IFRS or other reporting standards and reviewing significant issues identified by management
• If applicable, advise management on preparing carve-out and pro forma financial statements
• Review of management’s assessment of the disclosures required by regulatory agencies
• Tax advisory services during restructuring
• Corporate governance advisory services
• Support developing and assessing the internal control system, including during the financial reporting process
• Advise the company in developing the “Management Discussion and Analysis (MD&A)” and other parts of the prospectus
• Help management address and resolve issues raised by CMB and Istanbul Stock Exchange in their reviews
• Company valuation for IPO purposes
• Assistance identifying the optimum offering structure (including tax issues)
• Audit and review of historical financial information in the prospectus
• Support for other parties involved in the transaction (e.g., comfort letters)
• Due diligence on behalf of the underwriting bank
• Overall project management during the IPO process

The life of a public company is different from that of a private one. The key element of market regulation is the information provided to investors – for example, the frequency with which the companies report and the information they provide on matters such as major shareholdings.

Stock exchanges require listed companies to make timely announcements regarding financial and non-financial information or major decisions that may affect their stock price.

PwC provides support with understanding the continuous obligations requirements as well as the following:

• Advice on compliance with regulations and standards, including the CMB, SEC, UKLA and other European regulations
• Providing assistance in embedding policies and procedures to enhance the company’s internal control environment
• Reviewing management’s evaluation of new or complex accounting treatment under IFRS or other GAAP
• Providing courses and technical updates on IFRS and other regulatory developments
• Support in preparing secondary offerings and support with disposals/acquisitions (e.g., circular for shareholders)
• Advice on shareholder value management
• Advice on investor relations management
• Advice on creating a tax-effective structure to finance business operations
• Development of tax-effective incentive schemes for management

We are providing legal services to companies who are looking to raise capital and/or finance in the financial markets through initial  and/or secondary public offerings, private placements, rights issues, bond offerings, secondary offerings, etc. and our typical services, are inter alia, the following:

• Drafting of the prospectus
• Preparation of prospectus attachments
• Preparation of issue documents
• Review of listing requirements
• Handling application processes at the Capital Markets Board and/or Borsa Istanbul

The first crucial steps

• Gain an understanding of which market is right for you and what regulations and market practices you will have to comply with
• Build an advisory team and clearly communicate your expectations of them
• Agree a realistic timeframe for your transaction with all advisors
• Structure the story of your company – if your financial record is complicated by a reorganisation, de-merger of operations or changes in accounting policies, you will need to determine a plan for how to clearly present this
• Assign a project management role – you may need additional expertise and resources to project manage your transaction, as your own resources and management time will be fully stretched during the process

How we can support you

• An independent view of the critical issues in accessing a particular market
• An unbiased evaluation of which advisors are right for you
• Experience in guiding management and companies unfamiliar with the capital raising process and the documentation required
• Unrivalled experience of dealing with regulatory rules and market practice in Turkey, the UK, US and other markets, and the ability to spot and iron out difficulties in advance
• Ability to project manage key parts of your transaction on schedule