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Pros and Cons of an IPO

How to Get the Best Valuation

How to Get a Top Prospectus

The IPO Process

What is the Target Profile

Knoke:  Going public has pluses and minuses. First, we need to explore why you want to do an IPO. There might be some other ways to solve the problem. For example, if you need more cash, long-term debt is sometimes cheaper (but riskier).  If you need non-cash resources, a merger, acquisition, or joint venture might be best. If an IPO is best, we can work with your other advisors to help position you to get the best valuation.  (Of course, if you've already selected an investment banker, chances are this decision has already been explored.)

Knoke:  Public offerings are great if you want shareholder liquidity to diversify your wealth. It can also bring cash into the company for expansion. Being public also makes customers feel more comfortable that you are finally a mature, stable company. It makes it easier to use stock options to attract key employees. You can even use the "funny money" of stock certificates to acquire other companies without cash.

Knoke:  There are some disadvantages too. It puts you in the fishbowl. Everything you do becomes public record: your salary, your strategic alliances, and your profit and losses. A lot of time is spent on SEC (Securities and Exchange Commission) reporting regulations, and handholding shareholders. Also, in some cases, the company just hasn't positioned itself to get the best valuation.

Knoke:  For the best valuation, get started at least a year (or more!) in advance of your IPO. We call it "Pre-IPO Housekeeping." It starts with working toward diversified, positive sales growth, and profitability.   We need to get you in shape to have three years of clean audits.  It gives us time to recognize annomolies that might block investors, and to clean them up in an orderly manner.

How about your capital structure? We need to have an appropriate number of issued and authorized shares.  It is usually best to simplify the capital structure if there are multiple classes of stock. Conflicts of interest involving parent or daughter companies might have to be removed.

Often it is useful to review your Board composition to include some well-known outsiders, and see how we can streamline management with some heavyweights. These things and others affect your valuation.

Knoke:  Don't do it. A reverse merger is finding a defunct public company, and having it acquire you to go public. They do not create a market for your stock, the inherited shareholders are not bonded to your industry, there are potential unseen liabilities in the shell company, and there is a big stigma on these in Wall Street. If you want the best valuation, it has to go public in the proper way.

Knoke:  The next step is preparing the "Black Book" that defines the company and its prospects. It allows us to flesh out how your company looks on paper, and to ensure that we have no contradictions in strategy or operations. These and other anomalies get flushed out in advance to yield the best possible valuation downstream. For many companies, writing the Black Book actually becomes the galvanizing force that leads to complete housekeeping.

The Black Book will later be used to allow the prospective underwriter to visualize how you will look in the final IPO, how to market you and what your prospects are. If you have not yet selected an underwritter, it is useful to prepare the Black Book first, to add clarity and professionalism to who you are and what you want to do.  The universe of quality underwriters for any size company and industry is limited. You've got to get it right on the first visit.

Knoke:  The Pre-IPO Black Book does much more than impress investment bankers. It forms the foundation for the attorneys to draft the appropriate language for the Registration Statement (S-1) required by the SEC, and that forms the basic sales "brochure" to the public.

Remember that the Black Book (and documents that stem from it) is the vital link between the Company and the investor. As a marketing document, it must be concisely written, interesting, and with thematic focus. As a business document, it must be logically consistent so that marketing, production, organizational and financial policies hang together in a focused strategy. As an informational document, it must provide the necessary decisional information to allow an incoming investor to evaluate fully the merits of the prospective deal. As a legal document, it must contain full disclosures and an appropriate financial structure.

Knoke:  Your security law firm will draft any final version of any Registration Statement.  But while they are experts in law, they do not pretend to be experts in your Company or the unique dynamics of your industry.  They rely on input from you for these factors.

We understands this. We are specialists at putting your company in the best light, while making full disclosures and minimizing the legal downsides. We take pride in the fact that attorneys praise our work, and often they make only minor, if any, legal revisions in work product.

Knoke:  I personally take a critical role in each Black Book crafted by VALMAX. My book Bold New World: The Essential Road Map to the 21st Century is an international bestseller, now in ten languages. I also have lots of experience as an investment banker, with degrees from Harvard Business School (MBA), and Stanford University (cum laude Economics). People have said our Black Books are the best in the industry.

Knoke:  If you still have not selected an investment banker, there is no "best" underwriter. Some are better for Internet companies, others for manufacturing companies. Some are better for national deals, others for local brand names. Who is best at what is also somewhat dynamic, depending on latest successes and who is now working where. VALMAX can help you target the right underwriter and set up an introductory meeting.  It is best to target well, and focus on that underwriter, or a small group of prospective underwriters.

A solid Black Book is essential for these early stages. It sets the first impressions and will determine whether they pull the plug, or take the next step. The Black Book will give them a good idea of the look and feel of the final Registration Statement, and will help everyone avoid surprises downstream.

Knoke:  Once the underwriter is selected, there will be an all hands meeting involving VALMAX, your management team, along with your underwriter, attorney, and accountant. This meeting will be to divide the workflow to prepare the formal registration. This is where the Black Book we prepared will save a bundle of money, as much of the work will have already been done. The underwriter and your attorney will still need to undertake a "due diligence" to check out facts, or to reformat or add sections.  Additional compoents will come from your auditors.  But the Black Book already prepared has the potential to accelerate this process and save perhaps hundreds of billable attorney hours, and helps them make a more polished work product.

Knoke:  At some point, the Registration Statement has been filed and is about to be made effective by the SEC. Just prior to going public, you and your management team will travel around the country touting the merits of your company to key stockbrokers. Again, VALMAX can help your team prepare for this effort.

In my earlier years, I was an officer in a publicly held corporation that was listed by the Wall Street Journal as among the top ten performing stocks in the U.S. Since my job was the strategic planning guru for the company, I also got pulled into doing the road shows. More recently, I've become an internationally recognized speaker, and have been featured in countless press interviews. Our team can help you condense the Black Book into a coherent audio-visual presentation to maximize your potential valuation.

Knoke:  When the deal finally becomes effective, there is a short window of just a few days and the stock is sold. You are now public and your bank coffers are overflowing.

VALMAX can be there at each step to help you focus your company, and maximize its shareholder value. If the Black Book is implemented as planned, the valuations should stay high. And when you are ready for a merger or acquisition, we are ready for that too.