Timing is crucial for a successful initial public offering.
In 2021, IPOs boomed, setting records. But in the last three months of 2023, no IPO listings occurred, amid looming fears of a recession.
This is understandable, as the harsh economic environment of recent years meant many businesses put a greater focus on improving tight margins over more traditional routes to growth and profitability.
However, we are starting to see some green shoots of IPO activity emerge. The UK government is planning significant revisions to the listing rulebook and after years of speculation about potential listings from some of the UK’s biggest brands – including Monzo, Brewdog, and Starling – 2024 appears to be the year we may finally see these materialise.
But why now, and how can businesses be sure they are ready?
A favourable market
After the turbulence of the pandemic, the global economy is in a phase of fragile but promising recovery. Although the economy is far from racing ahead, the steady limp back to stability is encouraging an increasingly optimistic attitude, characterised by growth prospects and renewed investor confidence.
This positivity is a cornerstone for companies looking to go public, with investors actively seeking new opportunities to capitalise on this period of economic optimism.
This same optimism is evident in our latest research, showing that IPOs and mergers and acquisitions are one of the top priorities for UK finance leaders in 2024 (according to 34 per cent of those surveyed), surpassing investments in artificial intelligence (33 per cent) and efforts to become more purpose-driven and sustainable (31 per cent).
Though businesses find themselves in a markedly different world, the key indicators for IPO readiness have changed.
Determining IPO readiness
As we approach the midpoint of the decade, the global economy can so far be characterised by fundamental, structural change. There are now huge pressures on businesses’ margins and operating models, added complexity and fragility in their supply chains, and increasing risk and compliance issues.
Ultimately, traditional technology approaches and human scale processes are increasingly unable to keep up with the pace of change.
As a result, companies preparing for an IPO must move beyond mere survival and instead explore and adopt strategies to thrive in this complex and competitive economic landscape.
Growth at all costs may have been the priority for past IPOs, and the clearest indicator that a business was ready, but this is no longer the case.
Instead, the markers of an IPO-ready business are those that demonstrate how they have meticulously assessed and analysed their operations, identified inefficiencies, and implemented strategic measures to enhance productivity and reduce costs.
Growth is still important of course, but not without firm foundations that can withstand inevitable turbulence.
Proving effective financial management is now critical to any IPO. This has been an essential skill over the past few years and has enabled many businesses to reassess the way they operate on a fundamental level.
