Additional challenges
Once the decision about the IPO procedure has been made, a basis for the financials required must be built within the accounting system. Audited financial statements provide the foundation for this; they can be prepared in accordance with local GAAP, although a conversion to US GAAP or IFRS is compulsory.

Audited historical financial statements usually do not meet the strict mandatory regulations of the Public Company Accounting Oversight Board (PCAOB). If the auditors can comply with the PCAOB requirements early in the process, a lot of time can be saved in the IPO preparation phase. Another main challenge for project management is the necessary coordination of internal resources, auditors and the SEC lawyers working for the company. In contrast to the procedure in Europe, SEC lawyers are not only involved in creating listing documents but are also actively involved in reviewing financial statements. To avoid expensive and time-consuming review loops, a close coordination of involved parties and frequent regular meetings are necessary. Furthermore, one should not underestimate the complexities caused by converting accounting – whether out of necessity or strategy – from the international Euro to the U.S. dollar, especially in terms of preparing all registration documents and carrying out investor relations work. The strict PCOAB tests and the lack of limitation of liability for auditors in the U.S. also lead to significantly higher audit costs. Furthermore, the considerably higher fees of U.S. attorneys, in particular of capital market lawyers, need to be included in calculations. Finally, the main advantage of the U.S. capital market, i.e., the access to a broad investor base, is something that must literally be acquired.

Conclusion
Deciding to have any kind of IPO means that the IPO candidate must have high standards for its internal organizational structure. Thus, choosing an IPO in the United States, which lies outside the more familiar European stock market environment, increases demands on project management considerably and greatly broadens the scope of documents that must be prepared. Strong arguments for a U.S. listing, however, include advantageous regulatory differences, visibility in the world’s most important capital market, increased reputation and, most notably, access to a wider circle of industry-specific and financially strong investors. Yet a U.S. IPO comes with elevated effort and cost.

Author:
Ulrich Sommer joined FAS AG in 2000 and has been a member of the FAS AG board since fall 2007. As the Chief Operating Officer (COO) Sommer assures the operational coordination and execution of projects together with the heads of the segments Industry, Financial Services and Valuation and Transaction Services. Additionally, he is in charge of IFRS / US GAAP conversion projects, IPO readiness projects and projects for the optimization of finance and accounting.

Autor/Autorin