IPO

For companies considering an IPO, relationships with investment bankers should often begin well before the company formally mandates its IPO syndicate. Early banker relationships can provide valuable market perspective while there is still time to act on it — helping companies understand how public investors may view the business, pressure-test the equity story, and identify issues that may matter when an IPO becomes more immediate. As the IPO becomes more concrete, the relationship should evolve from market intelligence and relationship-building toward positioning, syndicate selection, and execution. The takeaway: engage with bankers early; formally mandate them later when the company is ready to pursue an IPO.

The Stages of Banker Engagement

Companies often think about engaging bankers as a discrete step in the IPO process — running a “bake-off,” selecting the syndicate and moving toward an organizational meeting. But the most productive banker relationships often begin much earlier. The purpose of those relationships, however, should change as the company moves closer to a potential IPO.

Relationship-Building (as early as 24–36 months out)

For many high-growth companies, banker relationships begin years before a potential IPO. At this stage, there is no mandate to award and no syndicate to construct. The objective is to develop relationships with a thoughtful group of bankers and to leverage their perspective to understand how the public markets are likely to view the company.

Bankers can be a valuable source of market intelligence during the pre-mandate period. They can provide periodic market and valuation perspectives, invite management to industry conferences, make introductions to potential investors, and help management understand how the public markets are likely to frame the business. These interactions also give bankers an opportunity to develop their understanding of the company well before they are competing for a formal role. Just as importantly, the company can use this period to assess various banks over a long horizon, rather than solely in the compressed setting of a formal pitch process.

This early dialogue can be particularly useful because the feedback comes while there is still time to act on it. Bankers may identify a disconnect between the companies that management views as peers and the comparables public investors are likely to use, a KPI that investors will expect but the company does not yet track rigorously, or an aspect of the business model that may require additional explanation or proof. Receiving this feedback early is important because some issues require time, not simply better messaging. For example, it requires time to build the systems that produce key metrics reliably, quarter after quarter, such that at the IPO the company can present multiple years of history against the very measures investors will use to value it. More broadly, early feedback can help management identify a weakness in the equity story — or in the business itself — while management still has time to address it. The goal is not to let bankers author the company’s strategy or equity story, but to use their perspectives to distinguish a messaging issue from a business issue early enough to address either. Companies should also develop relationships across several banks: each bank’s perspective naturally reflects its own franchise, coverage, and views of the market and triangulating among them can provide better intelligence than relying on any single relationship.

Testing the Story (roughly 12–24 months out)

As an IPO becomes a more realistic near- or medium-term objective, banker interactions should become purposeful and market-facing. Bankers can help companies deepen relationships with research analysts and begin appropriate investor education, including through bank-sponsored conferences, non-deal meetings, and, where relevant, late-stage or crossover financings. This engagement is best intensified once a company has genuine visibility into a potential IPO horizon, rather than merely the aspiration to go public. The objective is not simply earlier or greater exposure, but appropriately timed engagement once the company is ready to benefit from — and make a strong first impression in — those interactions.

One of the most consequential relationships is with research analysts. The investment banking team’s role is concentrated in the offering itself; the research analysts who cover the company will remain part of its public-market life for years afterward — publishing estimates, framing quarterly results, and interpreting the company’s strategy and performance for institutional investors. Their sector standing and understanding of the company can meaningfully influence how the company is understood in the public markets following the IPO. Prior to mandating the banks, conversations with research analysts can be genuinely two-way, including by analysts sharing perspectives on the sector. Once banks are formally mandated and an offering process is underway, analyst-independence rules effectively make these interactions one-directional. Nevertheless, even in the pre-mandate period, these conversations should be structured with care and should not extend to valuation or to any bank’s pursuit of an underwriting role, both to preserve analyst independence and to avoid complicating the process later.

In addition, bankers can help build investor familiarity before a formal IPO process begins. Once the process is underway, investor communications become significantly more regulated — and as a practical matter, the quiet-period and “gun-jumping” constraints of the federal securities laws generally begin to attach around the time underwriters are formally mandated, well before any public filing — and investor education is compressed into a limited series of interactions, including testing-the-waters meetings and the roadshow. Investors who already understand the company, its business model, and the key drivers of its financial performance are better positioned to use those interactions to evaluate the equity story and valuation, rather than learning the business for the first time. Bank-sponsored conferences, organized investor meetings, and other appropriate investor-education opportunities allow management to build that familiarity while also giving management an earlier view into the questions public investors actually ask before formal testing-the-waters meetings and the roadshow.

Earlier engagement, however, should not be confused with casual engagement. A premature meeting can be counterproductive: first impressions can be difficult to reverse, and investors and analysts do not simply forget information or expectations communicated in earlier interactions. Companies should think about consistency across private financing materials, investor communications, testing-the-waters materials, and ultimately the registration statement, rather than treating each interaction as a standalone conversation. Information shared in private financings or other pre-IPO interactions can also create legal and practical issues later in the process — for example, projections or other material nonpublic information provided to an investor can complicate that investor's participation in a subsequent IPO if the information remains material nonpublic information. These interactions also consume management attention that may be better spent building the business if an IPO remains too remote. Early outreach should therefore be deliberate, appropriately structured, and coordinated with securities counsel.

The Mandate and IPO Execution (roughly 8–12 months out)

The formal mandate marks the transition from pre-IPO engagement to execution of the IPO itself. As an IPO becomes an execution priority, companies typically conduct a competitive “bake-off” and formally mandate their lead bookrunners. The organizational meeting then kicks off the IPO-specific workstreams, including preparation of the registration statement, valuation and positioning, testing-the-waters and investor education, analyst preparation, roadshow planning, and, ultimately, pricing, allocation, and distribution.

From that point, the banks become part of the core working group and are actively involved in the IPO-specific workstreams. They are closely involved in drafting the registration statement — particularly the business and marketing sections that carry the equity story — and in translating that story into the framework investors will use to evaluate the offering. They lead investor education: identifying the institutions best positioned to anchor the order book, arranging testing-the-waters meetings, and synthesizing investor feedback into refinements of positioning and, ultimately, valuation. And they drive the offering's rhythm — advising on when to convert the confidential submission to a public filing, when to launch the roadshow against the market backdrop and the competing IPO calendar, and how to sequence analyst preparation alongside the offering itself. As a result, banks are typically one of the first groups of advisors formally engaged for an IPO process.

Bank selection should reflect more than proposed valuation or league-table position. Companies should consider the strength and availability of the specific team that will staff the transaction, relevant sector experience, distribution capabilities, and — importantly — the research analysts. Syndicate size and composition should also be deliberate. A broader syndicate can expand distribution and prospective research coverage, but additional banks add coordination and dilute economics and attention across the group. Companies typically select the lead bookrunners at the mandate and add other bookrunners and co-managers later, allowing the core working group to remain relatively small during the early stages of execution.

For private companies backed by venture capital investors, acquisition is frequently the most likely path to liquidity. Founders are often laser-focused on product development, market expansion, and fundraising, without devoting the same early-stage discipline to ensuring the company is well-positioned for a future exit via a merger or acquisition.

M&A preparedness is not a late-stage exercise, but an operational strategy to position your company as an attractive, high-value target to potential acquirors.

Corporate Governance

Some of the most common obstacles to efficient M&A processes stem from issues related to corporate governance. Complex capitalization tables, unclear chain of equity ownership, and unresolved governance issues can create transaction delay and, depending on the structure of the transaction, loss of leverage.

Companies should consider focusing on three key areas of corporate governance to be prepared for future M&A processes: capitalization table discipline, stockholder rights, and board and stockholder alignment.

Capitalization Table Discipline

Maintain clear documentation of all equity issuances with proper board and stockholder approvals; confirm board minutes are complete, approved by the board, and signed; verify that 83(b) elections have been timely filed with respect to restricted stock grants to founders and early employees; and ensure 409A valuations are updated following major events that may impact valuation (such as a financing) and, absent such events, at least annually.

Stockholder Rights

Ensure all stockholders have signed the relevant stockholder agreements and that the company’s management team understands the protective provisions embedded within such agreements; similarly, ensure that the company’s management team is familiar with relevant provisions of any investor side-letters (think drag-along mechanics, rights of first refusal, and co-sale rights).

Board and Stockholder Alignment

Understand what approvals are required to approve a sale or merger of the company and whether any investor has blocking rights.

Contracting Discipline

Material contracts, such as key vendor and customer agreements, collaboration agreements, and licensing arrangements, are some of the first diligence requests in an M&A process. These contracts often contain assignment or change-of-control provisions that can require third-party consent, accelerate payment obligations, or trigger termination rights or other contractual rights that could significantly impact the trajectory of a deal. Accordingly, it is important for companies to maintain clear records of all material contracts, ensuring that all contracts are fully executed and include all attachments, exhibits, amendments, and restatements. Companies should track whether any material contracts have upcoming renewals or expiration dates. Additionally, tracking key provisions in such material contracts that may be triggered by an M&A (such as third-party consent requirements) will help streamline the M&A diligence and consent process.

Intellectual property is another value-driver for life sciences companies and technology companies, making it vital for companies to have documentation that clearly delineates intellectual property ownership. Companies should verify that all employees and contractors have signed Proprietary Information and Inventions Assignment Agreements (PIIAAs), review consulting agreements to confirm that intellectual property created by consultants/contractors has been validly assigned to the company, and obtain confirmatory assignments from founders and early contributors, if needed, and at the appropriate time. For companies with affiliated entities, confirm that the company’s core intellectual property assets sit within the target entity and not within any affiliated entities.

Being proactive can save time and expense during the M&A diligence process.

Regulatory Compliance

Depending on industry and geography, regulatory risk can become a gating diligence issue. Companies should identify areas of risk and preemptively resolve any outstanding compliance risks (e.g., data integrity, marketing, industry-specific licensing, etc.). In particular, life sciences companies should consider pursuing regulatory planning with the assistance of healthcare and/or FDA counsel (as needed) to ensure, among other things, that regulatory filings, communications, and approvals are complete and accessible.

Deal Team Preparation

Once the company has decided to start a sale process, identify at the outset who will be part of the core deal team, which will typically consist of a select number of employees and outside advisors. Members of executive management and other key internal personnel with specialized knowledge about the company’s corporate governance, labor and employment practices, employee benefits structure, assets (IP, real estate, etc.), litigation exposure, and regulatory compliance are typically included within the core deal team. Further, at the appropriate time, companies should engage outside advisors, such as outside legal counsel, financial/tax advisors, and investment bankers, all of whom can help quarterback the transaction and efficiently drive the deal process.

After the deal team is in place, consider implementing deal confidentiality procedures to maintain the integrity of the sale process:

• assign code names to the project and company participants;
• limit working group size and access; and
• consider antitrust issues and the use of “clean team” agreements and data rooms.

Data Room Readiness

Prepared companies treat diligence readiness as an ongoing process and not an exercise triggered by a letter of intent or term sheet. First, select a virtual data room that provides strong security and activity tracking. Second, build the company’s data room with organizational discipline, using logical folder structures (corporate, IP, finance, regulatory, benefits, etc.) and uploading documents in a searchable, digital format with consistent document naming conventions. Lastly, in connection with building the data room, flag with the guidance of deal counsel any confidentiality concerns and access restrictions that need to be put in place. For example, are there any documents that need to be redacted or anonymized? Does the transaction present antitrust sensitivity requiring documents to be shared through a “clean room”?

In all, a well-maintained and categorically organized data room significantly accelerates a sale process and signals sophistication to potential acquirors.

The most successful exits rarely begin when a banker is engaged. Ideally, they begin years earlier with strategic and operational foresight. Companies that understand the value of M&A preparedness can preserve negotiation leverage and act more decisively when M&A opportunities arise. After all, engineering an exit is more than closing a deal — it is positioning the company so that the right deal finds you.

Whether a company is gearing up for an acquisition, a growth equity financing, or an IPO, a due diligence review will be an inevitable part of that transaction, and that review will test not only the current business but also the integrity of a company’s historical records. Readiness for that review is critical, as once a diligence process begins, gaps in corporate approvals, equity records, contract management, intellectual property ownership, and regulatory compliance can quickly become leverage for purchase price adjustments, closing conditions, and/or special indemnities. At best, diligence gaps can consume management attention at a time when a company has little bandwidth to spare. At worst, they can detract from a company’s credibility and can have a meaningful impact on deal speed and certainty. Most issues are fixable, but the available solutions often narrow after a deal is already on the table. This article provides an overview of actionable steps leadership at mid- to late-stage private companies can take to make transaction readiness an ongoing discipline rather than a pre-signing scramble.

Set Up and Maintain a Virtual Data Room

Rather than waiting until a letter of intent is signed, companies should stand up and maintain a virtual data room (VDR) early, using records they already keep locally, and treat it as a living repository of critical corporate documents. Management teams that prepare to address anticipated diligence focus areas and maintain organized virtual records early are better positioned when a process launches than teams that start flat-footed. Companies can get a head start by asking outside counsel for a standard due diligence request list, which serves as an organizational and gap-identification tool, as well as an organized table of contents for their VDR. This ensures that documents are comprehensive and indexed by categories prospective investors and acquirers will expect.

The VDR should contain current, fully executed, and dated documents together with all amendments, statements of work, and side letters. Superseded and terminated agreements should be archived, not deleted or mixed with operative versions. One small but time-saving step in setting up a VDR is using a consistent and intuitive naming convention as documents are uploaded, which will help not only management but also third-party reviewers quickly navigate the VDR’s contents. Once a diligence process begins, access should be staged and subject to tiered permissions, with additional controls for competitively sensitive information, compensation data, and litigation files; privileged materials should be withheld or handled through a process designed to preserve privilege. Particularly when a potential buyer is a competitor, or when the underlying material is subject to confidentiality restrictions that do not permit sharing with a potential acquirer or investor, counsel should advise prior to upload and contemplate redactions, clean-team arrangements, and restrictions on downloading or printing. When in doubt, leave it out; it is easier to pause early and evaluate permissions and other protections than to pull back a document after it has been shared.

A word of caution: prospective investors now run AI review tools that can scan an entire data room in minutes, and while that process can generate false positives, it can also magnify every internal inconsistency across the VDR, including in the cap table, contracts, and other materials. As a best practice, keeping the VDR updated quarterly helps identify issues early and positions the company and management to earn credibility from the moment that transaction diligence begins.

Maintain a Corporate Record Book and Organizational Documents

M&A buyers and growth equity investors will expect clean and current corporate governance records. This means prospective investors will review: current versions of the certificate of incorporation (including all amendments) and bylaws; board and stockholder minutes; and fully executed, dated written consents. An improperly compiled consent with a missing signature page or date can cost the company meaningful time and resources to track down or, worse, require corrective action to cure. Every material corporate action should tie out to a corresponding board and/or stockholder approval, including equity issuances, option grants, director and officer elections, and subsidiary formations.

Companies should also at least annually confirm good standing in their state of incorporation and in every jurisdiction in which they are qualified to do business. Outside counsel can obtain verbal good standing confirmations from third-party service providers, often for a nominal or no cost to the company. Good standing lapses can trigger fees, taxes, and penalties and, in many states, can bar the company from bringing suit in local courts until the lapse is cured, although a lapse does not typically invalidate contracts executed while the company was not in good standing. For an additional layer of caution, companies can consider ordering lien and litigation searches from third-party service providers in the same set of jurisdictions.

Ensure Vigilant Capitalization Table Hygiene

The company should expect buyers or investors to request a current copy of the capitalization table and, in the case of an equity financing, a pro forma cap table reflecting the completed round. Most cap table hygiene issues exist well before a contemplated transaction and surface in the diligence process. Common hiccups include unsigned option grants, undocumented stock issuances, unrecorded convertible note draws, and inconsistencies between vesting schedules and employment terms. Cap table accuracy is key: a company’s representations about its capitalization are often treated as fundamental representations, giving buyers or investors the ability to claim breach even for minor discrepancies. Moreover, a messy cap table can be perceived as poor ownership discipline by the company or its management.

With assistance from outside counsel, the company should reconcile the cap table against the stock ledger and equity grant documentation, ensuring that every stock and option issuance is supported by board resolutions, grant agreements, evidence of payment of the exercise or purchase price, and, if applicable, an approved, unexpired equity incentive plan. Each option grant should also be supported by a current 409A valuation that supports the board’s determination of the fair market value of the underlying shares.

Importantly, companies should develop a clear understanding of how antidilution provisions operate and how change-of-control acceleration clauses (single-trigger and double-trigger) may affect the equity/distribution waterfall in a transaction. Modeling these scenarios in advance allows management to communicate the deal economics clearly to all stockholders and avoids last-minute surprises that can derail negotiations.

Understand Key Provisions in Material Contracts

Counsel for buyers and investors will expect the opportunity to review each contract that is material to the business. These typically include: contracts with key customers and suppliers above certain revenue or expense thresholds; license agreements; leases; employment and severance agreements with key personnel; and other contracts that are important to the business. These contracts often contain change-of-control consent triggers, rights of first refusal, out-licensing restrictions, most favored nation provisions, exclusivity, non-solicit, non-compete, and other restrictive covenants. In certain circumstances, a counterparty may have a notice, consent, or termination right in connection with a transaction. Accordingly, with the help of outside counsel, a company should be generally aware of which key agreements contain those provisions and should have a plan for obtaining consents or providing timely notice in advance of entering into a transaction process. Seeking consent late in the process can give leverage to the counterparty, which can increase overall costs and decrease deal certainty.

Confirm Intellectual Property Ownership and Assignment of IP

Depending on the company’s core business, clean IP title is often a significant driver of the diligence process. One consideration that comes up time and again is whether every founder, employee, and contractor who contributed to the company’s IP portfolio has executed an invention assignment agreement that assigns all intellectual property rights to the company. It isn’t uncommon for advisors and early contributors in early-stage companies, often compensated in equity, to miss the assignment paperwork altogether, or to execute, but not date, the assignment. Any gaps in assignment should be addressed ahead of the buyer or investor diligence process, which can be done with the help of outside IP counsel. Companies should also routinely conduct an audit of open-source software usage to confirm compliance with applicable license terms.

Maintain Compliance with Industry-Specific Regulatory Requirements

Companies operating in regulated industries, such as healthcare, financial services, energy, and government contracting, should confirm that all material licenses, permits, and registrations are current and in good standing. Identifying regulatory approvals or notices that would be required in connection with a change-of-control or assignment of a license can avoid an additional layer of investor diligence caused when gaps are identified later in the deal negotiation process. Regulatory non-compliance discovered during diligence can significantly delay closing or reduce deal certainty.

In an IPO, due diligence is best understood as the working group’s disciplined effort to (1) identify and assess potentially material issues in the company’s business, history, and financial reporting, (2) translate those issues into accurate and appropriately balanced disclosure in the prospectus and related offering communications, and (3) pressure-test factual assertions so the offering record can be supported if challenged later.

A thorough due diligence investigation is designed to identify not only “problems,” but also facts that could disappoint investors if they emerge later without having been fairly described. Because an IPO is often the first time a company describes its business, results, and risks in significant detail, investors rely heavily on the prospectus as the principal disclosure document when evaluating the company and the investment.

The Due Diligence Investigation Runs from Day 1 Through Pricing and Closing

Companies should begin preparing their documentary data room in advance of kicking off an IPO process by identifying employees with subject matter ownership and assigning responsibility for collecting the relevant materials. Documents should flow to a single point of contact who will ensure materials are loaded into an organized virtual data room.

At the organizational meeting, having a substantially complete data room enables the working group to begin immediately and complete initial document review earlier, allowing diligence to run in parallel with drafting. This helps avoid a common frustration: marketing-forward disclosure drafted early in the process later must be rewritten based on diligence findings. Ideally, the working group incorporates diligence input as the disclosure is developed.

While the most intensive diligence typically wraps up around the initial SEC submission or filing, the work needs to continue through pricing and closing (including effectiveness and any bring-down diligence). New disclosure added in subsequent filings should be vetted, and new information and documentation should be added to the data room on a rolling basis. Maintaining an open issues log, with clear owners, next steps, and deadlines, helps avoid last-minute diligence scrambles that can disrupt the timing of amendments and the overall IPO schedule.

No Surprises

While it may not be enjoyable to share all of the company’s more challenging issues, companies should strive to ensure that underwriters’ counsel is not learning about issues for the first time late in the process. Early identification and resolution also avoids a common dynamic: issues are significantly easier to manage if the company or its counsel shares relevant details early, along with appropriate context, so that matters can be evaluated and framed appropriately from the outset.

This approach also protects against “over-reactions,” where diligence counsel believes it has identified a significant issue and therefore expands review and follow-up. That dynamic can devolve into time-consuming exercises and unnecessary “all-hands” calls, often avoidable where the issue was presented proactively rather than discovered.

Create a Record and Document Support

A thorough diligence record maintained by counsel helps to track progress, monitor efficacy, and create an audit trail in case of a later challenge.

Counsel should maintain a back-up book linking factual statements in the prospectus to supporting sources. Subject matter owners at the company should prioritize responsiveness to support requests and avoid treating the process as a check-the-box exercise.

The process itself should also be documented. Counsel can circulate written questions for diligence calls in advance and cover those questions on the call. A memo should capture attendance, and follow-up items should be tracked to resolution. The open issues log should be shared among the company, its counsel, and underwriters’ counsel and updated regularly.

Don’t Rely on the “Belief” Crutch

One of the most repeated phrases in an IPO prospectus is “we believe.” A statement of belief can be an appropriate way to express judgments or expectations that cannot be definitively verified, and it can help avoid overstating certainty. However, a belief qualification is not a free pass to make claims that are not supportable. Where management expresses a belief, there should be a reasonable basis for that belief and the diligence process should confirm that basis exists and that the disclosure is appropriately calibrated.

For example, a biotechnology company developing a new drug may state in the prospectus: “We believe our product candidate may offer clinically meaningful benefits to patients.” While there may not yet be clinical data demonstrating that outcome, there should be a sound scientific rationale and supporting pre-clinical evidence that provides a reasonable basis for the statement as framed.

Check with Experts

Counsel will review large volumes of material as part of the investigation, but that does not guarantee the working group will fully understand highly technical, specialized, or cutting-edge topics. In appropriate cases, diligence should include calls with relevant subject matter experts (whether technical, regulatory, cybersecurity, accounting, tax, or otherwise) to ensure the record supports the disclosure.

Diligence is More Than Lawsuit Avoidance

A properly conducted due diligence investigation can reduce the likelihood of securities claims for IPO participants. It cannot eliminate the possibility of litigation, but a thorough process can create a defensible record for those who may need it.

The credibility of the working group is also at stake. Underwriters care deeply about successful offerings. Their reputation is their biggest asset and missed diligence issues can cause real reputational harm.

More broadly, accurate IPO disclosure is a long-term asset. Companies will live with their disclosure regime as public companies, updating it regularly under ongoing investor scrutiny. Strong diligence helps public company executives spend more time executing their strategy and less time responding to avoidable surprises.

Moving ahead with an IPO is a major commitment of time and resources. The companies that execute efficiently are the ones that start managing the process well before the organizational meeting by building a realistic base-case timeline, staffing internal owners, and making a small set of initial decisions that drive the critical path.

Construct the Base-Case Timeline Around Key Milestones

A useful approach is to anchor the company’s IPO timeline around three broad windows. At the outset, establish a target IPO pricing date and construct the rest of the timeline to make that achievable. Once determined, establish a target date for the initial confidential submission of the registration statement and a date for the organizational meeting.

1. Readiness planning: preparing for the organizational meeting. The company’s approach to readiness planning can either pave the way for a more efficient process or inadvertently create bottlenecks that cannot be fixed on the back-end. The length of the readiness stage can vary, and more time means better preparation. Completing the key readiness workstreams before the organizational meeting is critical to staying on schedule. As part of readiness planning, companies should identify any third-party consents, waivers, or contractual constraints that may require outreach and turnaround time, because those items can create non-negotiable lead times that compress the schedule later.
2. Confidential execution: organizational meeting to initial confidential submission. This is typically the most drafting-intensive period and often drives internal resourcing needs. The company’s internal IPO team will be heavily engaged in the process and the IPO demands effectively create a second job for them on top of their day-to-day responsibilities. It’s critical that the company’s internal and external staffing is fully engaged and prepared following the organizational meeting.
3. SEC process: initial submission to public filing, launch/roadshow, and pricing. Companies have the least amount of control over this period as it depends heavily on SEC comment cadence and market performance. In practice, a slower or more complex SEC comment cycle can require additional confidential submissions and can also create financial statement update pressure as quarters roll, which can affect both timing and workload. Addressing challenging SEC comments is often best handled in the confidential submission process, which typically means additional confidential submissions and more time, putting pressure on hitting a financial statement staleness window. External factors are rarely predictable in advance, so the best planning will get the company to the public filing on time and enable business leaders to make a go-forward decision on the planned schedule.

Even in a well-run process, timelines move. Treat the company’s base case as a model that gets updated as the process evolves from factors that the company can control toward factors that the company cannot control.

Assign Ownership

Effective IPO execution requires effective organization. The plan and a company’s ability to hit its milestones become manageable with clearly defined internal roles and assignments given to those with the time and resources to properly manage them. A few readiness decisions tend to pay outsized dividends:

• Create a small internal IPO working group. This should include key decision-makers and functional leaders with responsibilities that touch upon the IPO process. The working group should stay in close contact through regularly scheduled meetings with internal and outside counsel to ensure accountability and focus on key workstreams.
• Identify subject matter owners for each workstream. Identify an individual to take ownership of each specific subject matter workstream, including communications, data room management, finance, accounting, legal, compensation, IP, tax, and regulatory, and then make them responsible for the day-to-day management of their workstream.
• Designate a lead draftsperson and a master-document process. Working with the company’s outside counsel, determine a drafting plan for the registration statement with an initial focus on the business section, the management discussion and analysis (“MD&A”), and financial statements. Company counsel can draft much of the registration statement, but someone at the company who has (i) an in-depth knowledge of the company’s business and mission, (ii) drafting and management skills, and (iii) time, should take the lead on overseeing the drafting of the business section. Assigning an owner enables narrative coherence that is not possible with multiple people drafting independently.
• Corporate housekeeping. Assign a tech-savvy person to oversee the due diligence document collection system to ensure the data room is complete and organized. This individual can also serve as a documentation coordinator for cap tables, stockholder consents, lockup signatures, public company policies, and employee education materials.

The practical theme: clarity on ownership of workstreams and tasks prevents the “everyone is responsible, so no one is responsible” dynamic that turns into schedule compression later. Each workstream owner should have clear escalation paths and decision rights (or access to decision-makers) to avoid bottlenecks and ensure key decisions are given the right attention and made at the right time.

Hire Advisors

Companies often treat the banking process as a separate track from readiness planning. It is not. Several early choices directly affect the company’s ability to run a controlled timeline:

• Underwriter selection and coverage strategy. Underwriter selection is one of the most important early decisions because it shapes execution roles, staffing, and investor positioning. In evaluating banks, companies should focus not only on senior coverage, but also on (i) sector fluency, (ii) the experience and availability of the day-to-day execution team, and (iii) the bank’s ability to support the company’s investor narrative through launch and aftermarket. A strong execution bench matters because it directly affects cadence, responsiveness, and how efficiently the working group can run.
• Outside Counsel. The IPO is also an opportunity to confirm that the company will have an IPO-ready legal team with the capacity and continuity to run a fast, iterative drafting and diligence process. Regardless of whether the company uses existing counsel or adds new counsel, the key is to ensure the team has deep IPO experience, the right specialist bench, and the ability to maintain a disciplined process from the organizational meeting through pricing and closing.
• Compensation Consultants. Public company executives are compensated differently than private company executives. Compensation committees will insist on getting high-quality input from experienced compensation advisors before making any compensation decisions. Additionally, structuring public company equity compensation plans is a significant and strategic undertaking. These plans require stockholder approval, which becomes significantly more challenging as a public company, so designing and implementing a plan to take effect alongside the IPO is essential and getting the details right will make life as a public company substantially easier. Lining up the company’s compensation advisors early enables them to give the right guidance at the right time.
• Communications/Investor Relations. While much of the IPO process is governed by what companies cannot communicate, developing a public company story and hitting the ground running as a public company with a functioning Investor Relations (“IR”) infrastructure will make the transition significantly easier. Companies will want IR professionals who are familiar with the story and involved in crafting it so that they can communicate consistently and clearly once public.

A good planning posture is to treat “advisor selection” as a gating item: once selected, the team can finalize the calendar, set drafting cadence, and schedule key events (including analyst education and investor-facing prep).

Financial Statements, Accounting, and Controls

The biggest internal constraint on an IPO timeline is the availability of audited financial statements. The SEC has strict rules regarding the inclusion of audited financial statements in registration statements, and missing a filing window before a staleness date can have significant consequences for execution of a timeline.

Key decisions and actions that typically belong in the earliest phase of readiness planning include:

• Audit readiness and Public Company Accounting Oversight Board (“PCAOB”) planning. It’s never too early to have financial statements audited under PCAOB standards. If a company thinks an IPO in the next two years is a possibility, then there should be a plan to produce the financial statements.
• Identify and resolve complex accounting issues. Complex accounting issues will require careful analysis and likely involve working with the national office of the auditor. It’s a time-consuming process both to analyze and resolve the issue and then complete the audit and draft financial statements. For discrete, high-risk accounting judgments, companies, in coordination with auditors and counsel, should consider early on whether SEC consultation or pre-clearance may be appropriate, as unresolved accounting issues can materially disrupt an IPO timeline.
• Internal controls and Sarbanes-Oxley Act (“SOX”) planning. Developing internal controls is an intensive process that requires an experienced staff and implementation of complex enterprise reporting systems that need to be deployed across the organization. Having a team ready to handle the rigors of public company reporting before going public is essential, and the earlier they are involved, the better.

The practical point: if finance readiness lags, everything becomes reactive. The financial statements and controls work cannot be “crammed” without creating risk.

Plan the Drafting Strategy

The best registration statement drafting processes are the ones where the company arrives at the organizational meeting with (1) a solid draft of the business section that will enable productive drafting sessions, (2) draft financial statements, and (3) a clear drafting plan. A few decisions matter disproportionately:

• Business section planning. This is the most time-consuming drafting exercise and will be the focal point of a substantial portion of the drafting sessions. Arriving at the organizational meeting with a draft that has a clear narrative will make those drafting sessions significantly more productive. It is substantially easier to refine a message in a drafting session than to write new text in a group setting.

There are different approaches to producing the first internal business section draft, and it’s a useful exercise to discuss the company’s plans with outside counsel. The main point is to formulate a plan and see it through all the way to the organizational meeting.

• Material contracts and redaction planning. The company will likely need to file certain material contracts with the registration statement and will likely want to redact commercially sensitive or confidential information from those contracts. This requires coordination with the contractual counterparty for review. As this requires divulging IPO plans to a third party, the timing of this outreach needs to be carefully considered, but it cannot be left until the last minute because it can become a negotiation process.
• Collect source material. If the company expects to cite third-party sources (market data, industry reports) or discuss internal, non-financial metrics, the company should start collecting those sources and consider how they will be used and supported. These are all key diligence materials, and maintaining sources while drafting can go a long way toward running diligence in parallel with drafting to avoid rewriting the business section if later diligence doesn’t check out.

Drafting is time-consuming and is often more challenging than expected. Private companies do not have prospectus-ready disclosure, so a significant amount of content needs to be created, and that content needs to live up to intense scrutiny that comes along with strict disclosure liability in an IPO. Early effort makes it less painful.

The timeline benefit is straightforward: once the narrative architecture and key performance indicator definitions stabilize, drafting cycles compress; until then, each diligence issue and SEC comment is more likely to trigger downstream rewrites that consume time and management bandwidth.

Plan Ahead for Communications

IPO communications restrictions and “quiet period” discipline are schedule issues, not merely legal issues. The company’s communications calendar (conferences, investor touchpoints, press, social media, internal communications) can create avoidable friction if not planned early. Communications discipline is a timeline issue because avoidable public statements, inconsistencies, or unsupported claims can force last-minute disclosure revisions or create heightened scrutiny at exactly the point in the process when timing is most sensitive.

A disciplined approach typically includes:

• Build a communications schedule. The schedule should cover all planned external events during the IPO period and the first months as a public company.
• Calibrate investor communications. Work closely with counsel to only communicate what is permitted and supportable, with particular care around the risk that public statements get amplified by analysts. Be mindful of investor and third-party consents and plan outreach that is not too early and not too late.
• Tighten internal communications. Provide appropriate guidance at key milestones to employees (including the first confidential submission and the first public filing). How early to inform the whole company is a judgment call that can vary depending on the size of the company, but in the pre-organizational meeting stage, it is generally advisable to keep IPO plans to those with a need to know.

The planning theme: communications discipline reduces the risk of last-minute issues that force drafting changes or create unnecessary SEC sensitivity.

A Note on AI in the IPO Process

Generative AI can be useful in producing some of the “boilerplate” sections of the registration statement and can be useful in incremental drafting (paragraphs, not pages) using structured source materials in an iterative manner. Any AI-generated drafting should be verified against source materials and the company’s actual records, because speed without substantiation can create avoidable disclosure risk and rework later in the process. For example, uploading one slide from the company’s pitch deck into an LLM and using a thoughtfully constructed prompt can produce one or two paragraphs of prospectus-style disclosure that can serve as a useful starting point for human-powered drafting.

“Conversion” drafting is also becoming increasingly used. For example, summary financial sections or MD&A tables can be populated from completed financial statements using AI tools. These uses build drafting efficiency, but they are not yet (as of early 2026) revolutionary.

Companies should be mindful of confidentiality when using AI and should ensure that employees are using a closed enterprise system and not a public-facing generative AI tool.

A greenshoe, which is also referred to as an overallotment option, is a provision in an underwriting agreement that allows the investment banks underwriting a public offering to sell more shares than originally planned to help stabilize the stock price after the offering. The term “greenshoe” comes from Green Shoe Manufacturing Company (now Stride Rite), which was the first company to use this mechanism.

Greenshoes are typically 15% of the potential base offering. If demand for an offering is much greater, a company would increase the base deal size. The window to exercise the greenshoe is almost always 30 days. Most typically, greenshoes are additional shares issued by the company but the greenshoe can be comprised of shares held by a selling stockholder.

A greenshoe can exist in both an “initial public offering” (IPO) and a follow-on public offering. Greenshoes are not used in “registered direct offerings” (RDOs) or deals referred to as “underwritten RDOs”.

Here is a simple example of a greenshoe:

• The company plans to sell 10 million shares of its common stock, which are referred to as the base shares, in its IPO.
• The greenshoe would be 1.5 million shares, or 15% of the base shares.
• If the underwriters elect to exercise the greenshoe, they may sell up to 11.5 million shares to investors, which is the sum of the base shares plus the greenshoe.

Why does a greenshoe exist?

The greenshoe helps:

• stabilize the stock price after a public offering;
• meet excess demand if investors want more shares; and
• protect underwriters from losses during the first trading days.

In practice, underwriters use the greenshoe to stabilize the stock price during the first 30 days after a public offering. The mechanics revolve around short-selling and covering that short position depending on where the price trades.

For example, using the example above of a 10 million share base offering, with a 1.5 million share greenshoe, and a public offering price of US$10.00:

• The underwriters will sell 11.5 million shares to investors, even though only 10 million shares are initially issued by the company to the underwriters.
• They do this by borrowing 1.5 million shares from the issuer or selling syndicate and creating a short position of 1.5 million shares.
• As a result, immediately after the offering, investors hold 11.5 million shares, only 10 million of which are actually issued, and the underwriters are short 1.5 million shares.

This short position is the key tool for stabilization. If the stock price falls below the offering price — for example, if the price falls to US$8.00 — the underwriters will buy shares in the open market at US$8.00 and use those shares to cover their 1.5 million shares short position. That open market-buying demand supports the stock price, and the underwriters profit (sold at US$10.00 and bought back at US$8.00). In this case, the greenshoe would not be exercised, the total shares issued in the offering is 10 million, and the company will have raised US$100 million in gross proceeds.

If the stock price rises above the offering price — for example, if it trades to US$15.00 — buying shares in the open market would be expensive for the underwriters. Instead, underwriters exercise the greenshoe and buy 1.5 million shares from the company at US$10.00. They then deliver those shares to cover their short position. In this case, the greenshoe is exercised, the total shares issued in the offering is 11.5 million, and the company will have raised US$115 million in gross proceeds.

Occasionally, the stock price is volatile and, during the greenshoe period, may trade above and below the offering price, which could result in a partial exercise of the greenshoe to cover the portion of the short position that resulted while the stock price was higher than the offering price. Generally, the greenshoe cannot be exercised in an amount that exceeds the net short position at the time of exercise.

By the time a venture-backed company reaches its mid to late stages, its board is usually built out of overlapping interests. Directors are affiliated with the funds that led earlier rounds, a founder may hold a large voting block, and executives and investors alike see a steady stream of opportunities, some of which look a lot like the company’s own roadmap. Generally, Delaware corporate law treats these relationships not as misconduct but as a process question. Most recently, Delaware corporate law received meaningful codified updates to its conflicted transaction rules and the key in evaluating such transactions remains to ensure that process follows the most recent developments in the law.

Loyalty Sets the Baseline

Directors and officers of a Delaware corporation owe fiduciary duties of care and loyalty to the corporation. The duty of loyalty bars a fiduciary from using a position of trust to advance personal interests at the corporation’s expense, and it is the source of both bodies of law discussed here. A conflict of interest does not by itself make a transaction wrongful; what it changes is the standard of judicial review if the transaction is later challenged. A conflicted transaction that has not been properly cleansed risks review for entire fairness, the most demanding standard under Delaware law, while a transaction that satisfies the statutory safe harbors described below is insulated from fiduciary duty damages and equitable relief.

Conflicted Transactions Under Section 144

DGCL Section 144 gives boards a set of alternative cleansing paths. An act or transaction involving a conflicted director or officer qualifies for the safe harbor if any one of the following is true: the material facts of the interest and the transaction are disclosed or known to the board or a committee, and a majority of the disinterested directors approve it in good faith and without gross negligence; the transaction is approved or ratified by an informed, uncoerced, affirmative vote of a majority of the votes cast by the disinterested stockholders; or the transaction is fair to the corporation and its stockholders. However, if a majority of the board is conflicted, the director-approval route must run through a committee of at least two disinterested directors.

Controlling stockholder transactions have their own rules, and the statute defines who is a controller: a person who owns or controls a majority of the voting power, has the right to cause the election of a majority of the board, or holds at least one third of the voting power together with the power to exercise managerial authority over the corporation’s business and affairs. On a maturing cap table, that can describe a founder with high-vote stock or, in some circumstances, a lead investor, and stockholders acting together under an agreement or understanding can constitute a control group. A controlling stockholder transaction (other than a going private transaction) qualifies for the safe harbor if it is approved or recommended by a committee of at least two disinterested directors with express authority to negotiate and to reject the transaction, or if it is conditioned on and receives an informed, uncoerced majority-of-the-minority vote. Only a going private transaction requires both protections, a deliberate departure from prior case law, under which both were generally required for a controller transaction to earn business judgment review.

The statute also defines disinterestedness. A disinterested director is one who is not a party to the transaction and has no material interest in it or material relationship with a person who does, with materiality keyed to whether the director’s objectivity would reasonably be expected to be impaired. Directors of exchange-listed companies also receive a heightened presumption of disinterestedness if the board has determined they are independent under exchange rules, a provision that becomes relevant after an IPO.

The Corporate Opportunity Doctrine

The corporate opportunity doctrine answers a different loyalty question: when a business opportunity belongs to the corporation rather than to the fiduciary who learned of it. A director or officer of a Delaware corporation may not take an opportunity for personal benefit if the corporation is financially able to undertake it, the opportunity falls within the corporation’s line of business and would be of practical advantage to it, the corporation has an interest or reasonable expectancy in it, and taking it would place the fiduciary’s self-interest in conflict with the fiduciary’s duties. The Delaware Supreme Court has emphasized that the factors are weighed together and that no single factor is dispositive.

In the venture ecosystem, fund-affiliated directors see deal flow across an entire portfolio, and founders and executives routinely encounter ideas adjacent to the corporation’s business. A fiduciary who takes an opportunity that a court later decides belonged to the corporation faces disgorgement of the opportunity or its proceeds. However, a fiduciary who presents the opportunity to the board and obtains a rejection from disinterested directors gains the benefit of a safe harbor, mitigating the risk of an after-the-fact judicial determination that the opportunity was usurped. Presentation is not legally required, but it creates a clean contemporaneous record, and the rejection should be clearly documented in the minutes.

Advance Waivers Under Section 122(17)

Delaware also permits much of this to be resolved in advance. Section 122(17) of the DGCL authorizes a corporation to renounce, in its certificate of incorporation or by action of its board, any interest or expectancy in specified business opportunities or specified classes or categories of business opportunities, whether presented to the corporation or to one or more of its officers, directors, or stockholders. Waivers of this kind are common in venture capital investments, where a firm and its designees may hold positions and board seats across a sector, and it is recommended to build them into the certificate of incorporation at the time of investment (which is consistent with the NVCA model certificate of incorporation). Note that such a waiver addresses only the corporate opportunity doctrine, not confidentiality. Accordingly, funds holding positions in competing companies should maintain information screens and avoid seating the same designee on the boards of competitors.

That said, advance waivers may not be an absolute shield to all issues arising out of potential corporate opportunities. Although details are scant as of the time of writing, and we expect to publish more detailed analysis once information becomes available, in August of 2026 the U.S. Department of Justice has been investigating certain venture capital firms with partners serving on boards of competing companies, potentially raising antitrust concerns, separate from the corporate law concepts of corporate opportunity.

DO’S & DON’TS:

Board Process for Conflicted Transactions

DO: Surface conflicts early and choose the cleansing path before approval. Disclose all material facts about the fiduciary’s interest and involvement, obtain approval from a majority of the disinterested directors acting in good faith and without gross negligence, and use a committee of at least two board-determined disinterested directors whenever a majority of the board is conflicted.

DON’T: Treat a conflicted deal as either automatically prohibited or automatically safe because the terms feel like market. Without disinterested director approval, a qualifying disinterested stockholder vote, or provable fairness, the transaction and the fiduciaries remain exposed.

Controlling Stockholders and Investor Directors

DO: Test whether a founder, investor, or group acting together is a controlling stockholder or control group under Section 144(e) before structuring any related party transaction. For controller transactions, use a fully empowered committee of at least two disinterested directors or a conditioned majority-of-the-minority vote, and use both for a going private transaction.

DON’T: Assume control requires majority ownership; one third of the voting power plus managerial authority can suffice. And do not rely on a stockholder vote to cleanse a controller transaction unless the deal was conditioned on disinterested stockholder approval by its terms when submitted for the vote.

Corporate Opportunities

DO: Adopt a simple protocol: fiduciaries promptly disclose opportunities arguably within the corporation’s line of business, the board or its disinterested members decide whether the corporation will pursue them, and any rejection is documented in the minutes before the fiduciary proceeds.

DON’T: Let a director or officer pursue such an opportunity quietly, or with the corporation’s resources, personnel, or information. Informal assurances from management are not a substitute for board-level disclosure and a documented rejection.

Waivers and Information Hygiene

DO: Consider a Section 122(17) waiver in the certificate of incorporation tailored to fund-affiliated directors and stockholders, revisit its scope at each financing, and pair it with confidentiality screens where investors hold competing positions.

DON’T: Seat the same designee on the boards of competing portfolio companies or treat a waiver as permission to share the corporation’s confidential information.