Page 134 - Initial Public Offering - An Introduction to IPO on Wall Street

While the cost of new workers can vary depending on your business's market, scale, and
complexity, the need to prepare ahead and be mindful of these costs is constant across
organizations and industries. Proper forethought and preparation for payroll expenses will have
a huge effect on the business’s long-term performance, as these costs will add up rapidly during
a period when the profitability of the organization is more important than ever before.

Advisor Fees (Tax, Accounting, Consulting)

A public corporation is subjected to a significant amount of scrutiny from the public as well as
from authorities and lenders. Therefore, businesses find it appropriate to employ third-party
consultants to maintain reliable records and comply with these third-party criteria.

PwC published another study comparing the costs of operating a public corporation, and
revealed in the other article by them referenced in this book that “financial reporting, regulatory
enforcement, and increased auditing costs combined accounted for a projected 52 percent of
the overall incremental continuing costs directly related to becoming public.”

Other Organizational and Unanticipated Costs

By no means are the costs mentioned in this section exhaustive. As has already been mentioned,
there is a significant amount of variation in the IPO process, particularly in relation to post-
IPO procedures and expenses.

After listing as a public corporation, you would probably be unable to foresee any expenses
that will be borne on a continuing basis. PwC revealed that about 40% of the surveyed CFOs
believed that the cost of becoming public was higher than they had expected. With this in mind,
prepare in advance to meet unforeseen costs so that your credibility with lenders and investors
will not be affected.
6.1.4 Post-IPO One Time Costs
Most of what has been reported about ongoing post-IPO expenses are also valid for one-time
expenses. PwC has reported that businesses would spend on average $1 million on one-time
expenses, post-IPO, much as with ongoing costs.

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