CASE STUDY: Helping private companies in the renewable energy sector get IPO-ready

Taking a company public is no easy feat, but the rewards can include access to a broader pool of financial resources to grow operations and expand market share. Before that can happen, organizations have to address a major change in their existing accounting processes and procedures: new financial reporting requirements. 

Not only does reporting cadence speed up, but the required, quarterly reports also become more detailed and must comply with both Generally Accepted Accounting Principles (GAAP) standards and those put forth by the Securities and Exchange Commission (SEC). 

For one large organization operating in the growing renewable energy space, these and other requirements called for a strong, experienced advisor like CohnReznick to help shepherd the company through the initial steps to operating as a public entity. 

CHALLENGE 

A clean technology company was contemplating going public using a special purpose acquisition company (SPAC), an entity established by investors with the sole purpose of raising money through an initial public offering (IPO) to subsequently acquire another firm (thus making that firm public without having to go through the official IPO process).  

As a private company, this organization had basic accounting and reporting systems in place, but needed help ramping up those systems to meet the requirements of its prospective investors. It had adopted private U.S. GAAP standards, but needed to step up its financials to comply with the more stringent, public company-ready U.S. GAAP.  

With CohnReznick serving as its external audit firm and following AICPA standards, the company also had to enhance that oversight in a way that met Public Company Accounting Oversight Board (PCAOB) rules. Already in talks with several investors, the organization – which lacked in-house talent to manage the enhanced reporting process – understood that time was of the essence. 

SYNOPSIS

Knowing that once a SPAC deal was announced, the company would have to move quickly to complete the transaction, we stepped in to help our client effectively manage the transition. With deep expertise in SEC public reporting and the renewable energy sector, CohnReznick anticipated a short, 3-4-month timespan between a letter of intent (LOI) and a completed transaction. 

We knew that investors would want to see several years’ worth of financial statements that complied with AICPA and PCAOB standards. This would require a deeper dive from the accounting requirement perspective, including multiple years of updated and audited financial statements that would have to be reviewed by internal management and external auditors. CohnReznik handled the preparation and review of those statements and then shared them with external auditors, who signed off on them. The company also had external SEC legal counsel review its disclosures and financial statements.

To help the company prepare for both the initial and subsequent filing requirements it will face if it goes public, we developed a holistic project plan that addressed both current and subsequent milestones along this path. Knowing that the company was operating with basic financial software and spreadsheets, we also identified technology solutions that the company may want to implement prior to any future filings.

Using a collaborative management approach, we provided technical expertise that our client used to prepare its financial statements in accordance with PCAOB standards and to also prepare its SEC documents. CohnReznick reviewed those documents, managed the project (e.g., developed timelines, set up real-time collaboration tools) and worked with the company’s external auditors to confirm that the financial statements and disclosures were properly adjusted.

CohnReznick also explored the various permutations and combinations needed to backdate the project by several years, with the goal of figuring out the potential impact had the deal been consummated earlier. This required in-depth understanding of both the renewable energy sector and the specific reporting requirements for this specific client. 

Throughout this process, we served as the link between the company’s management team, its external auditors, and its legal counsel. Working collaboratively, we got our client over the finish line and ready to go public within a very short time frame. 

RESULTS

The approach worked well. With the help of our tools and processes, the organization was able to file its proxy and financial statements with the SEC on time, and without being subject to hundreds of review comments from the SEC. As the company continues down its journey of becoming a public filer, CohnReznick is providing ongoing expertise for future consideration around the subsequent phases.  

By helping our client avoid an inefficient, drawn-out process, we effectively helped the company minimize risk and create less friction throughout the required reporting and auditing. It was able to continue running its business while concurrently preparing a future that may include a public offering. 

By combining our SEC public reporting expertise and our hands-on experience with the renewable energy market, we served as a strong advisor for a client that’s now well prepared to tackle the rigors of – and enjoy the benefits of – operating as a public company. 

BUSINESS BREAKTHROUGHS

• The company is now fully compliant with PCAOB and SEC reporting and accounting requirements that public companies must follow.
• Initial proxy and financial statements were filed with the SEC on time.
• High levels of compliance for submitted reports and other documents meant an easier SEC review process, with fewer review comments to manage.