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In what ways do the the internal organizational structure and processes of a private company change when it goes public?

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Topic Expert
Regis Quirin
Title: Director of Finance
Company: Gibney Anthony & Flaherty LLP
LinkedIn Profile
(Director of Finance, Gibney Anthony & Flaherty LLP) |

I have worked both in public and private institutions. The only difference is “the investor.” A private company has a little more flexibility, which is both good and bad. Decisions can be made at the direction of the owners or partners without much pushback. In some cases inefficiencies are excused, i.e. a receptionist that is over paid.

In theory - when a company is public, business development decisions are made solely based on how they impact shareholder value; and, expense decisions are focused on the negative effect to profit.

You have a responsibility to the shareholder, which includes answering their questions/concerns. Please review a blog I posted on this site – The Value of Shareholder Concerns to the CFO (5/2/2013).

Ted Monohon
Title: VP -Finance / Controller
Company: Fantex
(VP -Finance / Controller, Fantex) |

Here are some of the process changes I have see. It depends on what you have set up already:

- Corporate Governance - the structure of your BOD can change based on what pre-IPO committees you have. You also may need more independent directors and a "financial expert" as your audit committee chair.
- Disclosure - you will need a process for disclosure (8-K, 10-Q) which probably doesn't exist in a pre-IPO entity.
- Audit committee interaction - typically the audit committee interfaces a lot with management in the public company to coordinate the public filings
- Filing coordination - you will need a process to get your filings to EDGAR/SEC. Typically a printer does this for you (Merrill Corp / RR Donnelly)
- Proxy process - typically you don't have this in a pre-IPO company
- Transfer agent- again, you need to coordinate this as well
- Investor relations
- PR for quarterly earning releases and analyst calls (may or may not be applicable)
- 404(a) or (b) certification process by CEO and CFO

Hope that helps. Good luck!

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