Privately held companies are looking for an exit strategy given today's uncertain economy, but many don't feel prepared to do an IPO given the state of their internal controls, according to a new survey.
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"Regardless of the business objective, financial leaders at private companies are addressing the gap between current state finance function capability and desired state," said FEI and FERF president and CEO Andrej Suskavcevic in a statement. "The manual approach to internal controls specifically is proving to be challenging. This can impact the future of a business."
Nearly 40% of survey respondents said they were either more likely or much more likely to consider a potential exit transaction (IPO, SPAC or sale) than they were 12 months ago. When asked to consider the aspects of an IPO or SPAC that would be most challenging to their organization, survey respondents pointed to regulatory requirements (50%), followed by financial statement requirements (33%) and consideration of internal controls (32%).
Only 24% of respondents indicated that they are not considering an IPO, SPAC or sale, meaning the vast majority are evaluating the market for a potential exit transaction. While the responding companies were nearly evenly divided on whether their internal control environment was ready for a SPAC or IPO, 80% of the financial leaders who responded to the survey predicted they could have their internal control environment ready in one to 12 months. They indicated they would prioritize spending on technology and software with process improvements coming in as a close second versus adding new personnel.
"It's not surprising to see the deployment of advanced technologies emerging as a key focus for private companies today," said Michael Polaha, senior vice president of finance solutions and technology at BlackLine, in a statement. "This is a trend that generally emerges across all business functions, not just finance. We're seeing the private industry follow the practices set by public companies."
