Neil Murrin was the General Counsel at Trainline, and led the company through its IPO in June 2019. Trainline listed on the London Stock Exchange with a valuation of £1.68bn. This is a chapter from The Bundle: issue #2 - the IPO special.
Trainline’s IPO was the second largest UK listing in 2019. When we kickstarted this project, my initial reaction was one of excitement - but as a GC you quickly go from excitement to thinking about the strategy.
It’s easy to feel overwhelmed by the questions running through your head: what do I do now? What’s the plan I need to implement? What exactly do I need to know before I can start planning?
Add into the mix external factors that would influence the business’ timeline for this listing; from political, to economic, to commercial … and it’s easy to see why simply getting started can be the biggest hurdle for a GC tackling this project for the first time.
Here are eight steps that can help GCs prepare for an IPO.
1. Ringfence the legal team 🧑⚖️
First and foremost, GCs need to make sure they ringfence the legal team. It’s important to remember that this is a huge project that’s taking place alongside the business-as-usual legal work.
GCs can’t have every single lawyer working on the IPO, otherwise no-one would be able to address the day-to-day running of the company. It was easier for me, at Trainline, with 14 lawyers in my team; at scaleups with much smaller functions, it can be quite a challenge, but still just as important.
Legal leaders need to identify the people who are assigned to IPO work, and ensure their priorities are crystal clear. And similarly, we need to emphasize the importance of the everyday legal work, and ensure that legal is enabled to carry out that work while we’re buried under the project.
There are points where the entire legal function needs to be aligned, however - generally, legal tends to be the eyes and ears of compliance, so as a team we all need to understand what it means to be a public company.
At Trainline, we undertook several training sessions with the wider legal team to make sure they understood how to proceed with certain legal aspects, now that the company was public. The legal team carries on as usual, but needs that extra context and training on what it means to be a public limited company.
“Legal tends to be the eyes and ears of compliance, so as a team we all need to understand what it means to be a public company”
2. Choose the spider in the web 🕸️
I would recommend anyone who is handling an IPO to bring in a project manager - the spider in the web, who is the one in the middle keeping track of timelines and deliverables.
At Trainline we brought in a consultant who used to be a banker, which meant he had excellent insight on how to interact with the banks throughout the process.
He coordinated the daily morning meetings on IPO progress, asking each team about their tasks and whether they were on track to deliver. It was a huge weight off legal’s shoulders, not having to worry about chasing people and coordinating that ourselves, on top of all the other legal work on our plates.
3. Prioritize a due diligence questionnaire ✅
One of the first things I thought about when our plans for IPO were confirmed was getting access to a full due diligence questionnaire. I was provided one by a friendly lawyer in my network.
GCs need to go through that questionnaire with the project team and check off each and every question. They’re quite granular requirements around the business, contracts, IT systems, and much more - for example, ‘please provide all the contracts relating to your IT systems’, or ‘please tell us if there are any material restrictions in any of those contracts’.
I call it a gap analysis - legal ticks off the information that the business complies with, and that’s great - no action necessary. And the areas where legal doesn’t have information, or needs to improve, is a gap that GCs need to bridge before the team can move on.
Through this, we create a ‘to do’ list of tasks the project team needs to complete. The aim is that on the day of listing, the business is 100 per cent clean and everything is in order.
The earlier we can do this, the better; I did this nine months in advance of our day of listing - legal needs as much time as possible to answer questions and pull that information together!
This entire process helps with prioritization, where we can triage risks based on likelihood of them happening and impact, and address the high-risk issues first.
4. Address compliance issues 🔬
Many companies are subject to either regulation or compliance of some type, particularly in a heavily-regulated industry like transport or finance. If legal spots any lingering compliance issues, it’s essential that they work through those and have a clear line of sight to an answer or a means of resolving them.
The smallest issues can have the biggest impact - for example, we once acquired a small company that happened to have a final salary pension scheme.
It’s a tiny scheme, but whenever we considered selling the business in the past, that scheme ended up taking on a life of its own and blocking the process. Buyers noticed the risk on the scheme, which was actually worth a minute amount - and it became such a huge issue that it distracted buyers from the company itself.
And likewise, when it comes to the business’ IPO, GCs don’t want side issues becoming bigger than they should be.
"Speeding up the due diligence process can make a huge difference; that time-saving is invaluable, and also highlights the capabilities of the in-house legal team"
5. Carry out vendor due diligence 🕵️♂️
After I had completed Trainline’s due diligence, I found it extremely helpful to carry out vendor due diligence - which, at the time, wasn’t as popular as it is now.
This involves getting our own external counsel to complete a report on us as if they were carrying out a due diligence exercise on a different company.
This kind of ‘friendly due diligence’ allows lawyers to receive external validation on the work they’ve completed, where their chosen law firm is asking questions, requesting information, and writing out a report on the legal aspects of the company.
This report acts as a useful guide on points where legal needs to improve, but legal also has the choice of adding it to the data room as part of the IPO process.
This means that, come the actual due diligence banks are carrying out on your business, lawyers have an official report they can send to save time on the process. Speeding up the due diligence process can make a huge difference; that time-saving is invaluable, and also highlights the capabilities of the in-house legal team.
6. Create summary notes 📝
These notes are a useful follow-on from the vendor due diligence process. If GCs spot any issues that they need to resolve, whether it’s a licensing issue, or even an explanation on the regulatory environment, they can plan ahead on how they’ll address communications around this.
For example, the regulatory environment often invites questions from all sides of the business - instead of legal answering the same queries over and over again, they can do their own summary on the environment, and how their business will fit into it.
Legal avoids common questions this way, and that time that would otherwise be spent answering FAQs can be dedicated towards other, more important tasks on the checklist.
7. Consider a materiality threshold 💡
One of the most important things to agree with the banks and the lawyers at an early stage is around the materiality threshold legal should apply to the vast scope of information they’re providing.
On the one hand, we want to be as thorough as possible with that information - and on the other hand, we want to avoid giving them hundreds of documents that don’t really add value. Establishing a materiality threshold that allows legal to add contracts by cost, for example, can enable teams to focus on what’s important.
The same goes for regulatory issues, for example - often the questions in the due diligence will go along the lines of “please provide all correspondence with any relevant regulator.” If legal is always interacting with regulators, how should they filter that information? Do they add every email chain, which could lead to the thousands, or be selective?
Adding a materiality in that category allows the GC to choose the latter, and only include the important correspondence.
“Lawyers will run the marathon, reach the finish line - and then find out that the finish line is actually the start line of a whole list of new projects post-IPO”
8. Manage and motivate 🏆
This is a six-month investment of time - and it’s important to communicate that with everyone working on the IPO. It’s really easy to burn out if the team is working evenings and nights trying to get all the work done. It’s up to the GCs to manage both our own and the project team’s energy levels. It’s a mountain of work either way, but if the project is well planned and well executed, it’s manageable and extremely fulfilling.
The finishing line is actually the starting line 🏁
It’s the day of listing, the deal team is clapping their hands together and congratulating each other, but now the lawyers, the finance team, and the HR team have to live life as a public company. All that preparation legal carried out to get to this moment? Now they have to implement it.
The advice I would give GCs undertaking this project is to remember that the majority of the buildup to the IPO is actually just planning for what’s going to happen afterwards.
Lawyers will run the marathon, reach the finish line - and then find out that the finish line is actually the start line of a whole list of new projects post-IPO.
The first year after the IPO can be, in some ways, just as challenging as the preparation itself, because lawyers now have to implement processes to make the company PLC-compliant.
And the only way to keep on top of this is to create a 100-day plan in parallel to the plan you’re currently working on. Legal teams can execute that plan from day one of the listing.
Taking a company public involves a ton of work from the legal side, but it doesn’t have to overwhelm the lawyer in charge of the project - with a solid plan in place, and a strong support network, GCs can ensure that they power through the experience and lead their company to a successful listing.