While overall 2025 economic conditions have been positive, tariffs, persistent interest rates and geo-political instability are creating uncertainty. Yet many middle-market companies continue to explore opportunities to go public. After a challenging IPO market from 2022 to 2023, conditions have certainly improved. The IPO market has also seen a resurgence, with 13 IPOs each aiming to raise $100 million or more filed in January 2025 alone, marking the highest number of sizable IPO filings in a single month since early 2022. However, while market sentiment is improving, IPO readiness requires more rigorous preparation than ever before.
The Current IPO Landscape: Key Drivers of Market Interest
Several factors are fueling a renewed interest in IPOs:
- Companies that postponed IPOs during previous market uncertainty are revisiting their strategies.
- Strong public market valuations in key sectors—especially technology and healthcare—are attracting growth-driven businesses. The healthcare sector, in particular, continues to lead IPO filings, with multiple biotech companies entering the market in 2025 [Renaissance Capital].
- Private equity firms are seeking exit opportunities for maturing portfolio companies.
- Companies need access to capital for expansion, acquisitions, or debt reduction amid elevated interest rates.
- Investors have a heightened appetite for businesses with proven financial fundamentals and clear paths to profitability. The Renaissance IPO Index has risen by 4.9% year-to-date, outpacing the S&P 500’s 2.7% increase, signaling growing investor confidence in new public companies.
Despite these favorable conditions, successful IPOs require meticulous preparation, robust financial reporting, and a governance framework that instills investor confidence. Companies must ensure they are operationally, financially, and strategically ready for the transition to public markets.
Financial Reporting: The Cornerstone of IPO Readiness
One of the most critical aspects of IPO readiness is a company’s ability to produce timely, accurate, and transparent financial information. Public company reporting requirements are significantly more demanding than those for private firms, with the Securities and Exchange Commission (SEC) imposing strict financial disclosure standards.
Key Financial Readiness Considerations
To prepare for the scrutiny of public markets, leadership teams must assess their ability to:
- Generate SEC-compliant financial statements within required timelines.
- Produce comprehensive board-ready financial reports.
- Ensure their finance team has public company reporting expertise.
- Maintain compliance with ongoing disclosure and transparency requirements.
- Provide investors with meaningful peer comparisons through financial disclosures.
- Implement budgeting and forecasting processes that withstand market scrutiny.
Companies that lack these capabilities should proactively address any gaps to avoid delays in the IPO process and mitigate risks post-offering.
Critical Areas of Financial Disclosure
Segment Reporting: Providing Transparency to Investors
Segment reporting is a significant area of focus during IPO preparation. The SEC often scrutinizes segment classifications, particularly when companies report only a single segment. Companies must align their segment reporting with how their chief operating decision-maker (CODM) evaluates financial performance and allocates resources. Internal reporting structures and organizational charts should support these segment classifications to ensure consistency and compliance.
Non-GAAP Measures and Key Performance Indicators (KPIs)
Non-GAAP financial measures and KPIs play a crucial role in shaping investor perceptions and demonstrating a company’s value proposition. These metrics should:
- Align with the company’s strategic narrative.
- Be consistently presented across reporting periods.
- Comply with SEC guidelines for disclosure and presentation.
- Provide investors with a clear view of operational performance.
- Offer transparent definitions and methodologies for calculation.
Common non-GAAP metrics include EBITDA, adjusted EBITDA, free cash flow, and revenue growth metrics. Ensuring these measures are used effectively can enhance investor confidence and comparability within the industry.
Management Discussion & Analysis (MD&A): Telling the Story Behind the Numbers
The MD&A section of SEC filings provides investors with critical insights into a company’s performance, strategy, and risk factors. A well-structured MD&A should address:
- Revenue trends and cost structure evolution.
- Liquidity and capital resources.
- Cash flow analysis.
- Key operational drivers and business risks.
- The company’s long-term strategic vision.
Recent SEC modernization efforts emphasize a principles-based approach to MD&A disclosures, encouraging companies to offer deeper insights into their financial performance and future outlook.
Establishing a Strong Financial and Operational Foundation
To ensure a seamless transition to public markets, middle-market companies should focus on these essential steps:
- Assess Financial Reporting Infrastructure: Identify gaps in financial reporting capabilities and implement necessary enhancements.
- Strengthen Finance and Accounting Teams: Ensure teams have public company expertise to meet SEC and investor expectations.
- Implement Internal Controls and SOX Compliance: Establish governance frameworks to support transparency and regulatory compliance.
- Develop Comprehensive Tax Strategies: Optimize tax planning, transfer pricing, and international tax considerations.
- Enhance Treasury and Risk Management Functions: Prepare for public company treasury operations, including investor relations and cash management.
- Refine Financial Planning and Analysis (FP&A): Develop robust forecasting models and scenario planning tools.
The Importance of Expert Guidance
The IPO journey is complex, requiring a deep understanding of regulatory requirements, financial reporting standards, and investor expectations. Partnering with experienced financial advisors can streamline the process, mitigate risks, and improve public market success.
Partner with Experts for Success
We specialize in guiding client middle-market companies through the IPO preparation process. Our team provides:
- Comprehensive IPO Readiness Assessments – Identifying gaps and developing action plans to enhance financial reporting and governance.
- SEC Compliance and Financial Reporting Support – Ensuring financial statements and disclosures align with regulatory expectations.
- Internal Control and SOX Readiness – Establishing compliance frameworks to support a smooth transition to public company operations.
- Strategic Finance and FP&A Support – Strengthening financial planning, forecasting, and investor communication capabilities.
Take the Next Step Toward IPO Success
The road to becoming a public company requires careful planning, strong financial infrastructure, and expert guidance. E78 is here to help your company navigate the complexities of the IPO process, ensuring readiness and long-term success in public markets.
Connect with our team today to explore how E78 can support your company’s IPO journey.
