Sometimes the most important lessons you learn in business are the ones you learn on the firing line. I learned one of the most important lessons in my career working on an Initial Public Offering (IPO).
We were merging nine different companies, all relatively small companies, totaling about $200 million in revenues. It was in the rollup heyday in Houston, Texas. Merging nine different companies simultaneous with going public on the New York Stock Exchange.
Investment bankers can be intense
I had spent my career to that point in public accounting and a few years as a CFO in a private company. But that was little preparation for the intensity of the investment bankers working on putting the IPO together.
Nine different companies. Nine different accounting systems. Nine different accounting departments.
We were basically putting an accounting and finance group together on the fly while acquiring nine companies. And each company was still independently owned since the acquisition and merger of the companies was to occur simultaneous with the IPO.
The numbers tell a story to investors
One evening in particular made a big impression on me. The investment bankers from several different firms were all in a room together with management and the attorneys. The focus was on analyzing the most recent financial results that were to go in the prospectus.
I was shocked at the intensity in which the investment bankers drilled down on the numbers. They questioned the key drivers of the results and the trends and what was moving each of the numbers.
The numbers were all important to them. And when a banker didn't understand the numbers (or if they didn’t like the trend) they would fly off the handle . The numbers were so important to them because they knew that when they went out on the road show with prospective investors and investment funds, they had to know the numbers cold.
The numbers had to be right. The key performance measures had to be nailed. They had to show that the underlying business was moving in the right direction.
Management has to know the numbers
And as a management team, we had to be able to answer every question about the results and the drivers of those results to demonstrate to the investment community that we knew what was going on.
That's where I learned a very important lesson that having the accounting and financial side of your business under control is critical to creating confidence with the financial community and getting deals done.
And that deal made a lot of money for a lot of people.
Thank you Steve and Cary!
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