Key Issues to Consider When Going IPO/RTO - A Checklist
22 May 2018
The decision to go public with an Initial Public Offering (“IPO”) or Reverse Takeover (“RTO”) involves a significant amount of consideration as to whether it is the best option for the company to progress and grow, especially given the ever changing regulatory environment in which we operate today.
Once the button is pressed, the road map to listing requires numerous steps to be taken to ensure a successful outcome for all stakeholders.
There are various factors that the company needs to consider in order for it to be a credible investment for the public, these include:
- Does it have a robust business plan?
- Do they have a management team and board with the appropriate experience and leadership?
- Is the corporate governance framework adequate?
- Does it have appropriate financial and operating systems, including the control environment?
- Does it have the appropriate legal structure?
The next step is to work through the various requirements of the ASX and ASIC, including the spread of shareholders, satisfaction of either the profits or assets test and consideration of the minimum listing price.
As part of this process it is critical that the company assembles the best team possible.
This includes legal advisors, corporate advisors and other professional advisors. The right choice can impact on the success of not only the initial listing process, but more importantly the ongoing success of the company moving forward. Most companies will be aware that they will need an Investigating Accountants Report prepared for inclusion in the prospectus and some will know that the historical financial information will need to be audited for the most recent 3 years (where applicable), however a few additional key considerations that companies need to ask themselves are:
- Are you fully informed of the regulatory environment, including the relevant ASIC regulatory guides and ASX listing rules?
- Have you considered the potential escrow periods for the equity instruments to be issued?
- Are there appropriate incentive plans in place for executives and key employees?
- Have you considered the GST implications of the transaction, including all associated costs?
- Are you maximising the potential R&D benefits available from eligible expenditure?
- Are there any sovereign risk/cross boarder implications to consider?
- Is the company operating in a manner that will maximise its value both pre and post listing?
- Is the company/group structured in the most tax effective manner?
- Have you considered the ongoing reporting obligations of the company post listing?
- What will the impact be on the availability of the company’s tax losses?
- Are the vendors and promoters aware of the tax outcome of the proposed transaction/s?
There also needs to be consideration around the accounting implications of the proposed transaction/s which include but are not limited to -
- The impact of the new Accounting standards (AASB 9, AASB 15 & AASB 16) on the historical, proforma and forecast financial information?
- Given the company is likely to have previously not been audited, does the historical financial information comply with all the recognition and measurement criteria of the Australian Accounting Standards and are the accounting policies appropriate/in line with industry standard practice?
- Where the listing involves the acquisition of another entity or asset, has there been consideration in relation to:
- Who will be the accounting acquirer?
- Whether the transaction constitutes an asset acquisition or a business combination, including the implications of each?
- The accounting treatment/implications of any deferred/contingent consideration
- The purchase price allocation of the consideration, including the identification of any identifiable intangible assets not currently booked, where relevant.
Failing to have your team of advisers consider these issues can significantly impact on your progress.
So prior to selecting a professional service provider, ensure the company takes into consideration the importance of these factors and that the role of its advisor goes beyond the preparation of the IAR and audit or review of historical financial information.
How do we help?
BDO has extensive experience working in the Australian marketplace having assisted hundreds of companies go public through the IPO/RTO process. BDO currently audits over 140 ASX listed companies and has built an agile and skilful team that helps guide companies through what can be a complex and stressful process. This includes advising on the broader business considerations as noted above, both from a technical and commercial perspective. BDO has provided the following services for companies looking to go public: