After a long lull, there are signs of a resurgence in initial public offerings: In the second quarter of this year, IPO activity was up 82 percent over the first quarter and up 88 percent over the second quarter last year, according to PricewaterhouseCoopers.
Meanwhile, the total number of publicly traded companies has been in decline for more than a decade. Some major brands, such as Heinz and Del Monte, have been taken private, while other notable names, including Dell (DELL) and BlackBerry (BBRY), are considering following suit.
As contradictory as these moves may seem, the corporate leaders should follow three undeniable imperatives, regardless of whether they are taking their companies public or going private.
State the value with precise clarity. The chief executive must articulate how the company will outperform what it has done in the past and how it will further outperform the competition.
Given the precipitous decline in readership and value of newspapers and magazines, investors will want to hear from Joseph Ripp, Time Inc.’s new CEO, on how spinning out from parent Time Warner (TWX) will enable the publishing unit to reverse those trends. Ripp has yet to share any convincing reasons why Time will fare better as digital publisher. Stay tuned.
Build momentum with early success. In the first 30 days, make the organizational, operational, and strategic changes that will allow the company to deliver a strategic win within the first six to eight months. An early win will build momentum and begin to silence the detractors of change.
If Michael Dell’s intention in going private is to have the ability to take short-term revenue hits while he restructures his namesake to compete better, an early win for him would be the quick delivery of a product or strategic partnership that demonstrates the company can achieve that goal. So far, all we’ve heard from Dell are long-term plans, but in a very competitive market where the company has been falling behind, early wins are essential to build the momentum and confidence required to deliver on longer-range strategies.
Lead with the culture change. CEOs must consistently shepherd a culture makeover to support the new vision before and well beyond the financial event itself. Leaders must remove the internal barriers that have blocked success in the past and reward those who have genuinely embraced the new strategies.
Before going public, Google’s (GOOG) leadership, in an attempt to protect the valuable culture, hired wealth managers and coaches to help keep employees engaged and grounded while coming to grips with their new wealth.
Taking a company public or private is a key turning point and a significant legacy event for its leaders. If the three tenets are genuinely embraced, the chance of success is far greater. Ignore just one tenet, and beware.