Thinking of Going Public?
(Part one of a two part article)
BY JAMES W. SPINDLER
Is your privately owned company thinking of going public within the next 2-3 years? If so, it's not too early to do some advance planning and preparation, which can save much money and time.
- Interviews of Underwriters. If you think you may want to have your initial public offering ("IPO") managed by an underwriter, you should begin to assemble a list of potential underwriters, both regional and national. Members of your Board of Directors, as well as your attorneys and accountants, may provide suggestions.
Set up information interviews with several possible investment banking firms to find out what they offer and what they might require to assist you. Find out from them whether your existing attorneys and accountants will be satisfactory for the IPO.
Investment banking firms that engage in underwritings prefer clients that are represented by nationally recognized law and accounting firms. A company always looks more credible if the prospectus shows that the company is assisted by a well known law firm and a "Big Six" accounting firm. Such firms can draw upon considerable experience in public offerings and in filings generally with the Securities and Exchange Commission ("SEC"). These firms will assist in drafting the prospectus and registration statement.
- Interviews of Law Firms. If it seems desirable to select a different law firm to assist the company in the public offering, you should interview several of the principal law firms in your area. It may be appropriate to ask your existing counsel for recommendations of securities lawyers in major firms. As with the potential underwriters, the law firms should be asked about their procedures for public offerings. These would include staffing and fee arrangements, and steps to be taken by the company to prepare for the public offering.
- Role of Law Firm. In every public offering, the law firm will render a written opinion, filed with the SEC, on the legality of the securities being offered. In an underwritten public offering, the law firm will also provide a written legal opinion to the underwriters about a number of matters relating to the company. These include (1) valid incorporation, existence and good standing of the company and its qualification to do business in other jurisdictions, (2) authorized capital stock of the company and proper and valid issuance of all outstanding shares, and (3) proper description of all important contracts and other documents affecting the company.
- Putting Your House in Order. Once the underwriters and legal and accounting firms have been selected, you can expect to receive many requests for documents to be supplied to them. Having everything in order in advance will save a lot of time, trouble and expense. Your existing counsel may be able to help you clean up and organize your documents to be ready for review by others, with all loose ends and irregularities resolved and corrected.
Part II of the foregoing article, to be published in the next issue, will offer guidance on putting your company's pre-IPO documents in order.
Thinking of Going Public (Part II)
© ASSOCIATION OF INDEPENDENT GENERAL COUNSEL 1994; (all rights reserved). This article is not intended as legal advice. Consult a qualified attorney for assistance concerning a specific issue or problem.