The Initial Public Offering

Many entrepreneurs and small businesses dream of IPOs. (So do many corporate attorneys - ha!) But the actual process can be long and mind-numbing. And even a little mysterious, considering that many "experts" (lawyers, accountants, i-bankers) do the actual preparation work.

As always, BusinessWeek sweeps in with a great article introducing entrepreneurs, business owners, and your basic business nerds to the process. The IPO Adventure is a 4-part series designed to shed some light on the mythical and mysterious IPO.

Part I introduces the responsibilities and players. The timeline is usually chosen by the Board of Directors, but you should expect a 14- to 18-week process. The CEO and CFO will have their hands full with preparing the due diligence and prospectus, though the prospectus will also require a lot of work by the marketing department. The attorneys and accountants will ensure compliance with SEC regulations.

The author then discusses the vital role of the underwriter, and offers tips about how to choose an underwriter who will be supportive of your goals.

Next is the organizational meeting - in which all of the players meet to plan the process. The working group formed at the meeting will take care of the nuts and bolts (SEC filings and compliance), strategy (number of shares and for how much), and marketing the IPO.

Part II discusses what you, as the business owner or executive, need to do to prepare your company. The first step is to organize/reorganize your Board. The Board of Directors will be under scrutiny in an IPO, and you need to make sure that you have the strongest Board possible. This may mean getting rid of some members and/or recruiting new ones, and that can take some time.

Part of organizing your Board will require you to review your committee structure. You should have at least these three: audit, compensation, and nominating. The author outlines the operating rules that each committee should abide by, and the roles of each. The author also gives suggestions as to how to decide which Directors should serve on which committees.

Finally, the author suggests that you should reincorporate in Delaware prior to the IPO. The advantages stem from the fact that Delaware is the corporation capital of the US - its system of laws and courts are well-developed for corporate law, and it offers greater liability protection to Directors than most other states. (Attorney's note: Not all companies can incorporate in Delaware, and there are a new set of costs and laws that you will need to be aware of, so you will definitely need to discuss this step with your attorney!)

Parts III and IV are yet to come. This is a very well-written article full of interesting information and tips. I recommend that you read it if you're considering an IPO, interested in finance, or just plain curious about the process.