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Analysis

How private equity investors can drive IPO readiness

Prepare your portfolio companies for their S-1 filing

History has shown us that the IPO window can be unpredictable and swift to change. That’s why we encourage private equity investors to require their portfolio companies to keep a level of readiness for going public. Lack of preparedness could result in missed opportunities. Learn what you can do now so your portfolio companies can pivot quickly when needed. Asking the tough questions sooner rather than later can save a viable exit strategy.

Common obstacles in private equity deals

In recent 2021 and 2022 market cycles, we have witnessed IPO windows close almost as quickly as they opened. This volatility has taught private equity (PE) firms, sponsors, and their portfolio companies to stay on their toes when it comes to the path of going public. The lesson learned? It’s important for companies to maintain at least some level of IPO readiness to support that an IPO is a viable exit option. 

Private equity firms should keep their portfolio companies aware of certain deal breakers. For example, we have seen many portcos miss the IPO window because of an inability to scale their people, processes, and technology. Another common misstep is not overcoming unplanned Securities and Exchange Commision (SEC) requirements before the window closed.

Private equity portfolio companies’ path to going public

What private equity investors should ask early on

So, what can private equity firms do now to take advantage of the next IPO window? It’s never too early to ask the tough questions of your portfolio companies. Starting the conversation early can increase your understanding of their current IPO readiness as well as their plan over the coming six-, 12-, and 18-month increments. You may want to go so far as to require portfolio companies to provide regular snapshots to benchmark their progress against an established road map.

 

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