What is an MLP?
Many investors and others use the terms MLP and publicly traded partnership (PTP) interchangeably. Generally, MLPs are a subset of the more broadly defined PTP category.
A PTP is an entity treated as a partnership for U.S. federal income tax purposes that is publicly traded on an established securities market, a secondary market or the substantial equivalent of such markets. Entities operating as PTPs include limited partnerships, limited liability companies and Bermuda holding companies. Businesses operating as PTPs include financial asset management, real estate investments, amusement parks, death-care- and natural-resources-related operations.
Structuring an MLP
To meet market expectations, the MLP must be fully operational when it is launched—if not well in advance. An MLP must have established and effective processes and systems as well as its own commercial and operational contractual arrangements. In addition, it must be properly staffed to provide timely and accurate financial reporting and effective internal control. As part of the IPO readiness phase, a Sponsor needs to assemble the right internal and external team to assist with the IPO process and beyond.
Standing Up the MLP - IPO Readiness
To meet market expectations, the MLP must be fully operational when it is launched—if not well in advance. An MLP must have established and effective processes and systems as well as its own commercial and operational contractual arrangements. In addition, it must be properly staffed to provide timely and accurate financial reporting and effective internal control. As part of the IPO readiness phase, a Sponsor needs to assemble the right internal and external team to assist with the IPO process and beyond.
Financial Statements
Preparing the financial statements required for inclusion in the registration statements used to go public is typically a time- and resource-intensive process. Identifying the appropriate historical financial statements of the MLP and any additional financial information related to acquisitions or equity method investments is the first step in the process. After identifying the required financial information, a Sponsor can focus on aggregating the information and preparing the financial statements. Occasionally, this process requires consultation with the U.S. Securities and Exchange Commission (SEC).
Launching the MLP
The process of drafting and filing an initial registration statement on Form S-1 (the ‘registration statement’) and navigating the SEC’s review of the statement requires business leaders to successfully manage multiple competing workstreams while complying with a myriad of regulations.
After the IPO
Once the MLP becomes a public registrant, it must be ready to provide ongoing financial and operational reporting to its Sponsor, public investors, regulators and business partners. It also must report annual tax information to both the Internal Revenue Service and investors in compliance with the partnership tax reporting requirements of the Internal Revenue Code of 1986, as amended, and comply with the requirements of the Sarbanes-Oxley Act of 2002. Most critically, the MLP must be positioned to execute its long-term growth and success strategies.
