Insight into the costs of an IPO can help outline an IPO to the board of directors, employees and other stakeholders within the company. Having a realistic expectation of the costs can help improve the budgeting process, limit surprises and reflect a well-structured IPO timeline.
Planning, executing and managing an IPO is a complex task for any organization. The better prepared your company is, the more efficient and less costly the process can be. If you are thinking about being public in the next one to two years, then it’s time to get started.
Because of the significant effort and time needed to develop the capabilities for being public, a thorough IPO readiness assessment can take 12 to 18 months to complete. The assessment will help you determine where your company currently stands and then assess and identify gaps in your company’s preparedness. This will provide key information related to how much your IPO will cost.
Underwriting makes up the largest component of IPO costs by far. Based on the public registration statements of 315 companies, on average, companies incur an underwriter fee equal to 4-7% of gross proceeds, plus an additional $4.2 million of offering costs directly attributable to the IPO. Legal and accounting fees also add up and can increase significantly for larger companies that may face additional complexities in preparing for an IPO.
In addition to the costs associated with going public—the offering and incremental organizational costs—there are significant expenses related to being public. Most private companies do not have the infrastructure to operate in a public company environment, and to satisfy this new level of regulatory and reporting rigor, many companies will incur a series of one-time and recurring incremental costs associated with being a public company.
Capital Markets Research Leader, Deals, PwC US
Capital Markets Advisory Leader, Deals, PwC US