Going public

How a private equity-held manufacturer successfully navigated its high-stakes, high-speed IPO push


In the summer of 2006, one private equity firm decided the time was right to bring one of its most attractive companies to market as quickly as possible.

The company in question was a well operated, mid-sized manufacturer of food products doing business in the United States and Canada. It had considerable brand recognition, a strong management team, and many years of operational experience behind it. The investors initially felt that because the company's financial reports were in good order, the required SEC filings could be accomplished in a few months time.

But there are stark differences in the reporting requirements between private and public companies, and both the investors and company management soon realized they needed help beyond the investment banking and legal resources they had available. The investors called on PwC for guidance, not only in preparing the necessary audits and financial statements, but also in the overall task of helping ready the private company for its public debut.

"The private equity firm looked to us as an advisor, both to themselves and the company they were taking public," said PwC audit partner Fred Eisenhart. "In situations like this, when there is a desire to do things quickly and, at the same time, to do them right, that's when the difference really shows up in what PwC can do."

The process of filing an IPO with the SEC is arduous. Companies must prepare an extensive initial filing document, which is typically followed by rounds of additional information requests and filings. In this case, management had to take multiple actions—including preparing quarterly statements, getting ready for an audit of a recent acquisition, and preparing company financial statements for SEC compliance—before the company would be ready for an IPO.

Early on, the PwC team mobilized people from the firm's SEC group, as well as technical resources, a concurring partner and specialists in such areas as tax and capital markets. PwC advised the company to engage additional in-house and consulting personnel to create an appropriate level of internal expertise and resources for the project.

PwC also established their own project management function to help manage PwC team members, clients, private equity holders, investment bankers, securities attorneys, and various other participants. Part of the project management responsibility was to channel the endless demand for management attention.

"PwC has a policy for what to do in the case of a company going public," explained Eisenhart, "As we did in this circumstance, we are able to help ease the lives of local management teams unaccustomed to the demands of becoming a public company. We are also able to quickly mobilize specialists from across our lines of service and geographies, bringing together a broad team specifically for an IPO effort."

Becoming a publicly traded corporation would signify new responsibilities and updated processes for many employees in the formerly private company, particularly those in executive and financial management roles. Responsibility for regular reporting to the SEC falls on their shoulders, as does the requirement for the systems and controls demanded of a public entity.

"Going from private to public is a culture change," acknowledged Eisenhart, "When your financial statements carry the kind of visibility that public financial statements do, where a broad group of owners can suddenly challenge everything you're doing, it can become a more stressful situation."

That stress can be alleviated by having the right resources in place within the company to ensure timely compliance, as well as having a competent and experienced team of advisors to call on.

As for the private equity investors, the project brought considerable value. They were able to move quickly and decisively to take advantage of the market conditions their investment strategies had called for, and PwC's independent viewpoint and project management expertise proved paramount.

"Private equity investors want objective advice about a range of exit strategies for the companies they hold," Eisenhart explained. "They're not necessarily going to get it from the investment banker whose earnings may be impacted by one outcome versus another. PwC's private company services practice is distinct, because we not only help companies execute their transactions, we also provide an objective voice in a situation in which there are very few objective voices."