Finance Functions Play a Big Role in IPOs, SPACs & Sales

Private companies are increasingly relying on finance and accounting (F&A) professionals to navigate complicated events like an initial public offering (IPO), absorption into a special purpose acquisition company (SPAC), or an outright sale of the company.

This is true even during uncertain economic times.

The talent and critical oversight required to manage these liquidity events fits nicely with the skillsets of F&A professionals, but these teams are often already stretched thin with other responsibilities, many of which are manual, time-consuming, and error prone.

In fact, based on survey data and interviews conducted by the Financial Education & Research Foundation (FERF), more than half of all respondents named manual, error-prone internal control workflows as a top challenge to SPAC or IPO readiness. In addition, 76% of respondents selected shifting away from manual workflows in favor of higher-value tasks as a top priority for management.

While the recent volatility of the markets and inflation numbers might have put a damper on some liquidity events, the subject has remained top of mind for many private company leaders.

From the survey, fewer than one in four respondents indicated that they were not currently considering an exit. Almost 40% noted that they were either more likely or much more likely to consider a potential exit transaction than they were just 12 months ago. These stats speak to the attractiveness of a liquidity event and the resources private company financial leaders are devoting to planning for such an outcome.

Get your copy of the FERF study How Private Company Finance Functions Are Adapting to Scale for Growth, Exit Opportunities to access full details of the survey.

Aspects of an IPO, SPAC, or sale that rise to the top of the list of challenges that companies must consider include regulatory requirements, financial statement requirements, and consideration of internal controls. Solving many of these challenges falls on the Office of Finance, and more than half of all survey respondents indicated that manual, error-prone workflows were one of their top barriers.

In discussing how manual workflows impact a finance function, one CFO in the biotech industry said that manual processes can have double time costs (i.e., the time to perform the process and the time to remedy errors). Another CFO noted how his team had made it a point of emphasis to remove manual processes, describing them as “fraught with human error.”

With the variety of technologies and software solutions on the market, it can be difficult to know how to approach incorporating new technology into a finance function’s arsenal.

Company executives and F&A leaders—both in the FERF survey and in many others—note that moving away from manual work in favor of analysis and higher-value tasks is a key area to address. Whether your organization is preparing for or just thinking about an IPO, SPAC, or sale, reducing or eliminating manual workflows is a great place to start. Begin with activities your teams perform that are highly manual, that involve frequent interaction with a spreadsheet or database, and that have high potential for human error. This could include automating routine journal entries or auto-certifying account reconciliations, eliminating some of the lower-value busy work and freeing up team members for the type of effort needed to analyze and prepare for liquidity events.

Leaders should focus on simplifying and streamlining processes and leveraging technology to increase decision-making speed. Aligning technology with people and processes will empower finance functions to operate with the agility and velocity needed to adapt and scale to meet long-term business needs and potential exit events such as a sale, SPAC, or IPO. 

Explore how BlackLine’s Financial Close Management solutions can help private companies accelerate their financial close and accounting processes with reduced risk and create more time for analysis.