What preliminary step does a PE firm take before proceeding with an IPO?

Hiring an investment bank for underwriting is a critical preliminary step that a private equity (PE) firm takes before proceeding with an initial public offering (IPO). The investment bank plays a vital role in the IPO process by helping the PE firm navigate the complexities of going public. This includes formulating the offering structure, determining the appropriate pricing of shares, and advising on regulatory requirements. The investment bank also aids in preparing necessary documentation, such as the prospectus, and coordinates the marketing efforts to attract potential investors to ensure the IPO is successful.

Engaging with an investment bank is essential because they bring expertise and credibility to the process, which is particularly important in instilling investor confidence. They assist in marketing the offering to institutional investors through roadshows and help manage the aftermarket performance of the shares once they are publicly traded. This relationship is fundamental to setting the stage for the IPO and maximizing the valuation and success of the PE firm's exit strategy.