3 Maybe Not-So-Hidden Communications Priorities in an IPO
During an initial public offering (IPO), there are bankers, lawyers, potential investors, sometimes-jittery management teams … and more bankers and lawyers to wrangle, inform and mollify. It’s a months-long process of the company and communications team navigating challenges. Leading up to key milestones, such as the IPO roadshow and list day celebrations, the lengthy to-do list causes countless companies to make a critical mistake: pushing three items aside until there is “more time” after the IPO. Don’t be tempted—the to-do list is equally long on the other side of list day. Prioritizing these items before your IPO will put your company and your communications team ahead of the game:
1. Your Environmental, Social and Governance (ESG) Platform: New public companies undergo a level of scrutiny from investors that they’ve never felt before, especially when it comes to ESG policies, programs and commitments. No longer a nice-to-have for investors, ESG considerations are now integral to corporate strategy, creating opportunities and mitigating risks. With the rise of socially responsible investing and Wall Street’s increased understanding of how ESG practices can have a material impact on your company’s bottom line, a well-defined ESG platform is now table stakes.
In FleishmanHillard’s 2019 Authenticity Gap study, we found top consumer concerns currently include access to affordable, quality healthcare (84 percent); access to affordable, quality education (79 percent); and protecting the environment (75 percent). This sentiment holds true for investors: winning the hearts and minds of the public requires knowing who you are and what you stand for.
During your IPO roadshow, investors likely will quiz the management team on your ESG platform and its impact on everything from sales to talent attraction, to carbon emissions and the long-term viability of your company. Media, too, may get in on the analysis leading up to list day. Simply paying lip service to ESG won’t stand up to scrutiny. Having a solid ESG platform and plan to communicate it before the IPO will save you from having to play catch-up defining and explaining your stance before, during and after the IPO.
2. Your Governance Structure: Independent agencies rate how shareholder-friendly public companies’ practices are, so communicators need to be prepared to explain their company’s governance structure and any potential pitfalls that may affect their rating. Governance decisions include determining which state to incorporate in (each has different rules and protections for companies), whether to have an independent board chairman, and annually elect or stagger the board.
It’s perfectly normal for IPO companies to put protections in place that enable them to get a handle on being a new public company before opening themselves up to greater outside influence — largely from activist investors and hedge funds. But the less friendly those protections are to shareholders, the more likely independent agencies are to recommend — during your first annual meeting — votes against certain company proposals.
Communicators must be ready to share the “why” behind your current governance and the path to making it more shareholder-friendly over time as you execute your growth strategy. Doing so before the IPO can save you from a scramble ahead of the first annual meeting (which will happen sooner than you think!).
3. Depth of Change: Communicators know that an IPO comes with significant change, but most underestimate the massive importance of change management after going public. Throughout this process, you will need to lean on your change management consultants in a way you never imagined. Employees will be anxious about everything from benefits to retirement, expenses to discounts for big customers, and what they can and can’t tell people about the IPO.
If you’re being spun off from a parent company, employees will ask about transition service agreements (TSAs) — or what a TSA is — and how to do business under them, whether their IT help desk is changing and whether they can still get into the parking garage if you share an office with the former parent company.
Your readiness to communicate effectively and efficiently to employees about the many changes will be a determining factor in how smooth your transition from private to public is. Starting to address the change communications needs during — not after — the IPO process is the hallmark of a communications team that is ready for the public spotlight.