Three layers of cost
1. One-off external costs
| Category | Typical items | Main driver |
|---|---|---|
| Underwriting | Management, underwriting and selling fees; incentive fee | Offer size and structure |
| Legal | Issuer counsel, underwriters' counsel (usually paid by the issuer), local counsel | Complexity, number of jurisdictions, US offering component |
| Audit and accounting | Audits and reviews, IFRS conversion, comfort letters, pro forma reports | State of reporting readiness |
| Other advisers | Independent IPO adviser, tax, commercial due diligence, remuneration consultants | Company-specific needs |
| Regulator and exchange | Prospectus approval fees, admission and listing fees | Venue and market capitalisation |
| Marketing | Financial PR, roadshow logistics, investor presentations, website, advertising for retail offers | Offer type and investor reach |
| Documentation | Prospectus production, translations, virtual data room | Length and languages |
| Insurance | Prospectus liability insurance, increased D&O cover | Risk profile and venue |
2. Internal costs
- Management and finance time, often for six to twelve months.
- Interim staff or consultants to back-fill the day-to-day work.
- New hires before listing: investor relations, legal and compliance, technical accounting.
- Systems: reporting, consolidation, disclosure management.
3. Recurring costs of being public
- Annual and interim audits at listed-company standard.
- Investor relations: staff, events, roadshows, conferences, website, IR tools.
- Board fees for independent directors and committee work.
- Listing fees, registrar and annual general meeting costs.
- Compliance: insider lists, managers' transactions, disclosure processes, legal advice.
- D&O insurance.
- Higher reporting effort: ESG and sustainability reporting where applicable.
Cost drivers you can influence
- Readiness. The better the reporting and governance before kick-off, the less the advisers have to fix.
- Scope. A US institutional tranche, a retail offering in several countries or a dual listing each add significant legal and documentation work.
- Timetable discipline. Delays and restarts cost money: advisers bill time, and documents need refreshing.
- Fee negotiation. Fee caps, clear scopes and agreed cost reimbursement limits with every adviser.
- Bank fee structure. A fixed fee plus a discretionary incentive gives the company a lever over performance.
Accounting for IPO costs under IFRS
Under IAS 32, transaction costs of an equity transaction are deducted from equity to the extent they are incremental costs directly attributable to issuing new shares. Costs that relate to listing existing shares, or to the secondary component of the offering, are expensed. Costs that relate jointly to issuing and listing are allocated on a rational basis, often in proportion of new shares to total shares offered. Fees borne by selling shareholders under a cost-sharing agreement need separate treatment.
Agree the allocation method with the auditors early. It affects reported earnings in the IPO year.
Building the budget
- List all parties and their engagement terms.
- Separate fixed fees, capped fees, time-based fees and success fees.
- Model the underwriting fee at the low, mid and high end of the expected offer size.
- Add internal and recurring costs, so the board sees the full cost of being public.
- Allocate between equity and profit or loss, and between the company and selling shareholders.
- Track monthly against actuals; review scope changes with each adviser before work starts.
Use the IPO cost budget tool to structure the numbers with your own quotes. It does not insert market rates; you enter each assumption.
Educational guideRules differ by country, exchange and segment and change over time. Confirm specifics with the exchange rulebook, the regulator and your advisers.