Kate Winget:
Sam. So whether you're three months, three years, what are the things you need to be preparing for as you're approaching or considering an IPO?
Sam Adams:
So if you're three months out from a potential IPO, that's an enormous event to manage in a very short period of time. You're likely going to have to cut some corners to be able to enter to the public market without a lot of preparation to stand up and be ready to execute on all of the things that come after the IPO. I think it's important to remember that an IPO is a huge event and something to celebrate, but it's really just a milestone in a company's life cycle. There's a whole nother world on the other side of it, and so ideally, you have more time than that to be prepared.
I coach clients all the time around thinking about 18 to 24 months out from a large event and really starting to dig into your systems and infrastructure, how you collaborate with teams across your organization, how you communicate both to your leadership and your board as well as to your individual participants and shareholders around what equity means, why we use it, why it's important, and what people's individual responsibilities are around having equity programs and start thinking critically about what you're going to need to not only execute through an IPO event, but beyond that.
So things to consider that often take a lot of time are things like budget and staffing, implementing new systems. It may be an HR system, it may be an equity system, but systems that can scale with you through the next phase of your life cycle. And those things take a lot of time to do. It could be six months to a year, so you want to make sure you bake in more time than you will actually need. Integrating systems, right? Automation is a huge time saver in this space. I think all of us want to be able to do more interesting things with our day-to-day roles and not just manually processing things like stock option exercises or 10b5-1 transactions, and so aligning resources with your provider and helping support those efforts as well as making serious technology investments into this space.
Oftentimes, I spent a lot of time in-house before coming to Morgan Stanley to lead the private issuer execution team. So I've had many years to think deeply about what it means to be an operator and be able to execute with very short notice. And what that comes down to is having a strong foundation and really good relationships, both with your internal organization and then anybody who's a third party provider, your law firm, et cetera. So my team today focuses on how to help clients roadmap out these types of large transactions. It may be an IPO, although an IPO isn't a certainty and many companies go through transactions along the way. So as you're thinking about building all of your alliances internally inside of your company, that looks a lot like spending a lot of quality time with your leadership, your C-suite, your board, making sure that if you're someone who's leading anything related to an equity function, you have a voice at the table.
But it also means building a really strong relationship with any third party providers that you're leveraging to help you not only manage this data, but to provide a really important experience to your participants. And so oftentimes, things that are behind the scenes to participants, start to really come into view when you are going into a transaction like a tender offer and IPO. And so having a strong relationship with your provider so that you have a trusted resource to send your participants to, to make sure that they can have their needs fulfilled is really important. And I know Kate, you also spend a lot of time thinking about that, working on it and building teams around how to support clients. So I'd love to hear from your point of view what that looks like.
Kate Winget:
So I think also, when we consider this, it's an event for the company. It's an event for investors, but it's also an event for your people, and it can be something that is new to individuals, it could be it's happened before to them, but it's also hitting them at the professional and the personal level, bringing in the considerations and ensuring that they know the timing, the readiness, what should they be planning for in their personal lives and seeking out resources to support them because obviously, your head's down in it, you're focused on it and it's all consuming. It could be all consuming to the leadership team, but those individuals that have brought the company this far also need to be planning for that event. It could also be a change in their own teams, right? The staffing that they're going to need to support this. What are the resources that they will need to go forward? What are considerations that they have about the changes that come with it?
You're much bigger, you have larger teams, you have larger individuals, and so it is important that they're also along this journey with you. So you, the company, are planning for it. You've got all hands on deck ready for that moment in time, and you might've had the three months, the three years for planning. Your employees need that same preparation. They have considerations around what could be generational wealth and life-changing events. They're thinking about trusts, estates, wills, preparation. Some of them think about buying a home for the first time, and so how have they also gone along this journey and process with you? Communicating out, while it may be highly sensitive and confidential, as much as you can share with those employees at the time so that they're prepared, is incredibly important.
Sam Adams:
So that's a great point. I also am a strong proponent of starting to do some of that financial wellness and wealth coaching when the company's still private. And if you have a trusted partner like Morgan Stanley at Work, those resources are available to you, whether you're a private or a public company. Most employees don't know where to start, right? They don't live and breathe this stuff day in and day out the way we do. They're software engineers or marketing professionals. They're doing many, many different things. And how do you help them go beyond just the basic mechanics of what their equity award or general compensation packages look like and think about what their future plans are, right?
There's a lot of interesting ways to do estate planning, to save for retirement and tuition for your children that most people aren't exposed to. So you might as well leverage your partners early and often, and that way, they already have a strong rapport with that provider and they're ready to make big decisions when those wealth building events happen like an IPO. So, many of our clients are going through this for the first time at the corporate level. We have first time founders, first time executives. Most of the time, board members have maybe been through it, but they're not in the process every single day. So how does Morgan Stanley at Work align with a corporate client and help them through that transition period?
Kate Winget:
The world around them from the day to day has shifted. There's considerations around staffing, around the resources. We're often able to show the case studies of our experience of our other clients. What are the considerations now as you're administering a public plan versus the private plan? What are the considerations around your internal resources or new third party providers that you're going to have to align with? It also could come with change in leadership management and how do you continue to drive the business forward to what could be the next phase of its lifecycle? And it's an important piece that you've surrounded yourself with experts, seek out new talent that has gone through this before. Your team may not have as broad of a focus as it did or responsibility because you now have to introduce new resources around accounting, payroll, HR, HRS systems. It's just a very different experience on the public side, but the goal and objective was to get there.
And so ensuring that you also have that continuity of talent and you have that subject matter expertise of who was there in the early days and how do you continue to transition that knowledge forward. It's something certainly with our clients, there's people that have been there for years and saw it through the event, and now they've been able to grow out their teams and change their roles and responsibilities through the evolution of the company.
You're also now introducing new workplace benefits. Your retirement, your 401k becomes a deep focus, especially for a public company. Your needs as a public company are very different. Where you're looking for capital, you're looking for access to capital markets, your relationships could shift also with investment bankers and such. And so it's an important piece that the company has the resources and teams focused on this. As the company's benefits programs are changing and what they're going to be new benefits that they might be introducing, considerations for possibly a broader spectrum of employees that they need to work with and engage.
On the corporate side, there are considerations of where providers have multiple resources available to them through an ecosystem like cash, treasury management, capital markets, investment banking. And so if you're able to introduce one provider or a few providers to focus on that, it certainly simplifies the process for the companies. On the executive side, your executives are going to go through these processes and now, you've introduced new steps to their own equity compensation plan. You might be looking at non-qualified deferred comp plans and certainly, bringing new compensation plans to all the various participants that you have. You need to make sure you have subject matter expertise in those and how to administer them, staying within the rules and regulations and being able to seek out that support internally and externally.
Sam Adams:
So one of the biggest things that you're going to have to think about doing as you're preparing for a large transaction is evaluating the current systems that you use. The big one that we're talking about today obviously is your equity plan management system. Not all systems are created equal, right? And I think if you're a private company who wants to go public someday, that's the goal, then plan for that scalability. What do things look like three to five years from now? And can that system support you at that time? Many systems can't, right? Some are really only good for public companies. Some are really only good for smaller private companies. So really look and see which provider can help you scale and which provider can give you enough optionality that as you scale, you can do things like enter new countries with relative ease, right? And make sure that you have the right education and resources available to participants at all different levels.
Some people will be earning a ton of money out of these events, and other people have really just started with the company, and so they're at a different place in their wealth journey, and you want to make sure that you have support at all of those different levels. On the technical side, you need to make sure that your system can do accurate stock-based comp expensing, that you have a really reliable reporting because things are moving fast. You don't want to have to be auditing every single report that you're running out of the system before you pass it off to your general counsel or CFO, and that you have people behind all of that that can help you on a day-to-day basis, understand best practices, make efficiency improvements as much as possible, and are communicating with you on a very consistent basis around what's changing in the environment and how you can get better at running these stock plans together on a system.
Kate Winget:
On public companies, you hit upon it, the infrastructure changes.
Sam Adams:
It does.
Kate Winget:
And their board changes and their requirements are now changing and shifting. And so to that, being able to have a provider that grows with you and has also can support that growth and the considerations around reporting, audits, regulatory oversight, it is a very different experience for those individuals. And so if your technology's there in place and it can just migrate over with you and follow you through that journey, it can certainly be beneficial to the team.
I know we see that the client's unwinding something that's not going to support you through that next evolution of your company or firm is as much of a task to integrate something new, right? A new provider that's going to come there. And all providers are not created equally. So as you start to look across the landscape in the public markets, there's been consolidation in the industry. There's been new ways that the providers can support you, new benefits, new financial benefits. And so it is a time to take a step back and do it thoughtfully and with a thorough evaluation of like you said, the next there, five, 10, 15 years. And certainly on the side that we're seeing, which is what other benefits do your employees need? And being able to support that not only from the administration side, but the one-to-one human support side because there are all of the considerations they'll be having.
Sam Adams:
An experience I always had as an employee in-house when I was leading the stock admin function is that oftentimes, benefits were spread out over five, six different providers. And I think one of the things that's really unique about Morgan Stanley and attracted me to this role originally was that we are building an ecosystem where you can have everything in one place for your participants, and it's the full range of participants. It's everybody from the C-suite all the way through maybe hourly employees. And that is a massive win for a company because people get distracted when they have to go to five different places to understand what they have and how it all works. And so if you can bring it all under one umbrella, you're able to build long-term rapport with those individuals and hopefully help them make the best decisions possible across all of their different benefits.
Kate Winget:
I also think this is now a stage where the company might be having more of a global presence.
Sam Adams:
Absolutely.
Kate Winget:
And we often hear, "I want parody across my employees globally."
Sam Adams:
Which is challenging.
Kate Winget:
Which is very challenging through jurisdictions, also through culture.
Sam Adams:
Yes.
Kate Winget:
The expectations when you've gone to a much more global footprint is you have to have the considerations of the employee's cultural experiences, expectations. You hear things from the technology where some groups would prefer chat over email or phone or communications that way. So there are sensitivities on how to introduce new providers, new solutions that you're facing for the first time. On the global side as well, we hear the parody request of us, and it's important that those individuals in the seats that are making the choices and the decisions on which providers to use understand, you may not have parody. So is it something where you have different providers in different regions and jurisdictions, or is there a hybrid model where you can have the provider that you work with, let's say in the US, provide resources and solutions abroad, but it's focused on what's within the guardrails? And so you might expand your vendors or your providers, but you also are providing your employees with the best experience.
Sam Adams:
Absolutely. One of the things I love about the full ecosystem of Morgan Stanley and Morgan Stanley at Work is that it's a really stable institution, right? Morgan Stanley has been around for 87 years. Newer players in really developing the At Work space, but we have the full backing of the firm to be able to do it, which provides limitless resources for our corporate clients to continue to grow and scale, and for us to be able to meet them where they're at and then help them achieve their goals to be world-class companies.
Kate Winget:
With certainty, there will be market volatility. And so throughout your life cycle, whether it's you as the individual or you as the professional in the firms that you're working for, being able to look to your partners, your providers that have seen it throughout the years, the decades, certainly brings a sense of relief. And they're going to be there to, again, hold your hand through the processes. We're going to provide you with all of the knowledge and expertise that we've seen over 80 plus years, and also be able to bring outside resources beyond the workplace to answer questions for you, whether it's market research, it's our investments solutions, there really will be additional resources and services you can turn to because the markets won't always be in the direction that they have been for the last decade. And also, know that you can take advantage of that no matter where you are across the Morgan Stanley ecosystem.
