Page 135 - Initial Public Offering - An Introduction to IPO on Wall Street

New Financial Reporting System and Implementing New Controls

Although some of the costs for a new financial reporting system may have already been borne
before your IPO, by the time your IPO is done, it is likely your business will not be completely
incorporated into the new reporting system.

Professional accounting consulting fees for the introduction of internal controls in the updated
reporting system and IT consultancy fees for the deployment, integration, and testing of the
system can be included in these post-IPO expenses.

New Board of Directors

You will need to explore finding and hiring new board members, based on the composition of
the existing board of directors. The Board of Directors takes on several new and critical roles
as a public corporation. Think about the ethical stance of the Board; the Board's ability to
recruit, train and handle senior staff; the capacity of the Board to recognize and handle risks;
opinions on corporate governance of the Board; etc.

Vulnerabilities in these areas will lead to issues for your business down the road, so it is
important to take the time to structure a solid, well-rounded Board of Directors for your
organization’s long-term success.

New Compensation Plans

While a continuing cost is the fulfillment and management of compensation plans, a one-time
cost should be the development of stock-based and other types of pay programs. As with the
reporting system, at this stage, a great deal of the work and expenses associated with the
implementation of new pay plans may have been undertaken and incurred, but these plans are
unlikely to be finalized.

In their article titled "The-Entrepreneurs-Roadmap," KPMG addresses post-IPO pay plans,
stating that post-IPO compensation plans need to "[align] the business for progress and
consistency." "The article states that new public corporations will best address aligning and
maximizing the expense of individuals within a new public company with... providing value to
shareholders" through a "total compensation plan" that will "fulfill the requirements of all
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stakeholders ”. Such proposals are an essential component of being a public corporation and
should not be ignored.

6.1.5 Illustration of the Cost of Going Public by Gross Proceeds
The following table presents a variety of IPO costs directly related to an offering that you can
expect to incur based on your offering’s gross proceeds. The table is based on an assessment
of 600+ IPOs from April 5, 2012, to December 31, 2014, and is derived from the PwC article
referenced previously in this book.

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