A Practical Guide to IPO Due Diligence
Are You Inclined Towards Going Public?
If you are planning to offer Initial Public Offering commonly called IPO of your company, then it is highly advisable that you are aware of all the steps involved in it.
IPO is also called ‘going public’ in layman’s language as this is what it does. A private company issuing IPO, when successful, turns into a public company, listed on a recognized stock exchange.
Overview of The IPO Due Diligence Process
Introducing IPO is a complex process which needs immense preparation work and due diligence is of utmost importance as it helps the company, its underwriters and legal counsel in drafting the registration statement & prospectus.
It holds importance because of these reasons-
- The primary objective is to review all areas of concern, a thorough background check of the offering company.
- It should help uncover critical particulars related to the pattern of shareholdings.
- Find out about litigation related to the company or any of its shareholders that may adversely impact the image of the company.
- Study the complete history of the company, its strength as well as its weaknesses.
- Observe the economic health of the company in detail; their dealings, their successes, their failures.
- To disclose the key opportunities foreseen in the target market and the growth in the future.
- To study in-depth audits and accounts, the minutest of details, to get an idea of its real financial health.
Due Diligence Procedure
There is no fixed set of guidelines for the procedure of due diligence simply because it is specific to each case. What constitutes ‘considerable investigation’ is completely driven by the facts and circumstances related to the issuer and his offering.
Nevertheless, in general, a due diligence process almost always takes into its ambit-
- Background due diligence
- Business due diligence
- Legal due diligence
- Financial due diligence
- Accounting due diligence
- Corporate due diligence
Who Is Best Suited For This Job?
However much a company may consider itself to be well-organized prior to IPO, still, due diligence will play a vital role in highlighting the pitfalls ahead. For this very reason, it is said that ‘being forewarned is being forearmed’.
Therefore, while selecting a firm for due diligence, one should take a very informed decision. The firm should-
- Possess years of experience in the field with lots of satisfied clients.
- Should be able to provide a critical and comprehensive understanding of the issuer and his business.
- Must be successful in pinpointing the risks at the earliest possible opportunity.
- Must be resourceful enough to undertake inquiries into key issues with knowledgeable industry sources, government, and regulatory bodies.
- Inquire in detail with other parties and individuals such as suppliers, customers, distributors and competitors in a legal and ethical manner.
- Its investigation should be thorough in all aspects so as to perform value-added investigation and analysis that will help the decision makers to address risks.
- It ought to make and provide intelligible and informed decisions in order to maximize opportunities.
MUDS: Ensuring Your IPOs Safe Future
This consultancy firm is your best bet towards kickstarting your IPO dream and carrying it further to its successful conclusion. Its long innings in this field give an edge above others and with their pan India presence, it caters to all corners of the country.
MUDS will identify, review, assess and analyze all the crucial aspects as mandated for due diligence of the IPO. A time-bound professional investigation, the weaknesses, the strengths, the futuristic risks & growth, all will help in overcoming any hurdles in the way of your public offering.
“Due diligence of IPO helps in identifying and overcoming the weaknesses, lapses, and vulnerabilities, giving the mileage of effective defenses in time!”
-Shweta Gupta, Founder, and CEO, MUDS