Be ready when the IPO market is right for you

Jasmin M. Maranan (Technical Advisor CMAAS)

Globe Asia - March 2014

In 2013, Indonesia wrapped up the year with 30 Initial Public Offerings (IPOs) that raised proceeds of approximately US 1.6 billion, eight more IPPOs and 58% higher in terms of size than during 2012. Retail, consumer goods and services sector accounted for nearly 50% of total IPO proceeds in 2013. 

The success of the follow-on offering of Matahari Department Store Tbk in March 2013, which raised US$1.3 billion, the biggest stock sale in Indonesia since 2008, spurred many IPO hopefuls. 

However, the wave of global market volatility, concerns over lofty valuations and the country’s own economic woes (a widened current account deficit, accelerated inflation and local currency depreciation) spooked investors in the second half of 2013 and derailed the IPO train. 

Some companies postponed their IPO plans, others abandoned theirs altogether while a few continued their journey with their offering size cut in half.  Now 2014 will be a pivotal year for Indonesia,  as the country holds legislative elections in April and presidential elections in July.

While empirical data in 2004 and 2009 showed a run-off to the stock market index pre-election period, market observers believe that the hovering uncertainty over the political leadership could lead to restraint on IPOs. Amid this backdrop, Indonesia Stock Exchange (IDX) has set its sight on 30 listings for 2014.   

With or without the election cycle, volatility in the markets has become the new norm, making it clear that the window for IPOs can open and close quickly.  The lingering uncertainty regarding the global economic outlook that is causing stock market gyrations and short-term market events should not impact the process companies undertake to prepare for an IPO.  Being involved in an IPO is a once-in-a-lifetime event.  Miscalculating the time and complexity involved to transform a private business to the public realm is a common pitfall. 

So what should a company do? One way to ensure a successful IPO is to establish two equally important parallel work streams at the start of the registration process, preceded by a thorough ‘IPO Readiness’ assessment.  The two work streams are called “Going Public” and “Being Public”.

“Going Public” is the process of taking the company through the steps of gathering the necessary financial, marketing and business information; being subject to detailed financial and legal due diligence; preparing the prospectus/registration statement and clearing this with the regulators; and then marketing the business and selling the shares in the roadshow.  The registration process ends when the offering is sold and the company and/or its shareholders receive the proceeds.

“Being Public” is the process of transforming the organization into a public company.  Among the many tasks involved are upgrading, sustaining or enhancing the financial reporting capabilities; creating an investor relations function to communicate with the “market” and investors; meeting legal and stock exchange governance, reporting and internal controls standards and listing requirements of the IDX and the Financial Services Authority (OJK).

Going Public and Being Public require multidisciplinary approaches that involve all areas within the organization – the board of directors, shareholders, strategy teams, accounting and financial reporting, legal, treasury and risk management, investor relations, tax, human resources and information technology.  One of the more common mistakes is to delegate all aspects of the preparation to one group.  All department heads should be aware of what is transpiring, as they will need to provide input to the information-gathering process and will be asked to evaluate their department and determine a transformation plan for the new organization.

Long lead-up

Many companies start preparing for becoming a publicly-listed company well before the actual IPO process starts.  In the preparation stage, an IPO Readiness assessment can be useful to identify big-picture issues and prevent embarrassing deal killers or surprises late in the process. 

The right amount of preparation also helps establish a timetable based on the offering’s strategic objectives, specific business issues and the actual work that needs to be performed.  Such an assessment provides a reasonable basis for discussion with stakeholders about timing. 

The IPO Readiness assessment also identifies gaps within the new processes, areas needing internal controls and positions requiring enhanced technical accounting skills to operate as a publicly traded company.  Areas for review would typically cover group structure, financial information, corporate governance, financial reporting procedures and risk and compliance issues.  It becomes a starting point and provides a bird’s-eye view of where the organization is.

In summary, although the external IPO market is beyond control, companies envisioning an IPO in their future can start now and give themselves the best possible chance for success when the markets are open.  Companies planning an IPO must remember this: an IPO is not a sprint to the finish line, it is more like a marathon – a long-term process and transformational event.  Done right, an IPO can change the lives and fortunes of its owners, investors and employees.


Jasmin M. Maranan, a Technical Advisor for PwC Indonesia, advises companies on IPO preparation and execution.  She can be reached at