New internal control requirements if the company decides to go public
Leveraging a company reduces the amount of equity needed to fund an acquisition and is a method for increasing the returns on capital deployed.
The following is a list of pros and cons to consider in determining whether to take a company public. How familiar is it with the industry? Due to the large size of most public companies, which have annual revenues of several hundred million to several billion dollars, it is normally not feasible for an acquiring company to finance the purchase single-handedly.
It's not just a public offering of stock, but it can also be an intensely arduous and increasingly expensive ordeal. What is the acquirer's exit strategy? The exchanges also offer alternative listing standards based on cash flow, market cap, and revenue for larger companies not meeting the pre-tax earnings' tests.
This analysis will: 1 describe the importance of internal control programs, 2 identify effective internal control techniques, 3 illustrate the relationship between ethics and internal control techniques, and 4 describe the importance of the Sarbanes-Oxley Act.
Once an acquisition is agreed to, management typically lays out its business plan to the prospective shareholders.
For example, the economy could take a dive, the industry could face stiff competition from overseas, or the company's operators could miss important revenue milestones. When the review process is completed and the underwriters have 'built a book' of prospective IPO investors, the issuer's board of directors -- typically through a pricing committee -- and the underwriters will set a price at which the company and any selling stockholders will agree to sell shares to the underwriters at closing.
How does a company go public
It's not a move management can take lightly: a number of short- and long-term issues to consider exist, as well as a variety of advantages and disadvantages. Following the expiration of the quiet period, the company will be in frequent communication with the market, both through its periodic SEC filings and in its interaction with the analyst and investor communities. Shortly after filing, the company will also file its initial listing application with the exchange on which it wishes to list, and the underwriters will make filings with the Financial Industry Regulatory Authority FINRA in regard to the underwriter compensation arrangements. The internal control report must include: a statement of management's responsibility for establishing and maintaining adequate internal control over financial reporting for the company; management's assessment of the effectiveness of the company's internal control over financial reporting as of the end of the company's most recent fiscal year; a statement identifying the framework used by management to evaluate the effectiveness of the company's internal control over financial reporting; and a statement that the registered public accounting firm that audited the company's financial statements included in the annual report has issued an attestation report on management's assessment of the company's internal control over financial reporting. Because the prospectus is subject to extensive disclosure requirements, it will typically take several weeks to prepare and lawyers will try to anticipate the questions and comments the SEC will have to the filing. How familiar is it with the industry? These checks are in the best interest of the organization. Developing and assessing these controls can take time and be quite costly. Fortunately, both exchanges have alternative markets that have less rigorous financial requirements for listing companies. A company must comply with the new exhibit requirements for the certifications required by Sections and of the Sarbanes-Oxley Act of and changes to the Section certification requirements in its quarterly, semi-annual or annual report due on or after August 14, Two examples of the internal control procedures and they can be implemented. In some cases, private investors may easily find a buyer for their portion of the equity stake in the company. The reality of it is that human being are not always trust worthy, even in management positions.
Fast growing companies generally have strong management teams already in place, but the demands of becoming a public company often require additional strengths and capabilities.
In light of this, many pre-IPO companies seek to recruit CFOs or other executives from outside who have had experience going public with other companies.
based on 42 review