Raising the bar: What ‘IPO-ready’ means for middle-market companies in 2026

After a quiet stretch for public listings, many private equity sponsors are once again eyeing the IPO market. But the definition of being “IPO-ready” has changed significantly since the boom years earlier in the decade.

According to BDO’s Robert Trinchetto, the shift reflects a market that has moved from rewarding rapid growth stories to demanding durable fundamentals. Sharing his insights with InvestmentNews, Trinchetto, a Managing Principal for BDO’s Accounting Advisory & Outsourcing (AAO) group, says the environment companies face today is fundamentally different from the IPO surge of 2021.

“In 2021, many companies were focused on going public at all costs but not on preparing to be a longstanding, successful company,” he says. “If a company had a compelling growth story and was scaling rapidly, investors weren't asking hard questions about the path to long term growth. Now, we are seeing far more skepticism and scrutiny. Investors are looking beyond top-line growth to really understand how profitable a company is and whether that profitability can be sustained over time.”

According to Trinchetto, the result is a new definition of IPO readiness.

“This increase in due diligence is shifting how companies think about IPO readiness – listing day is no longer the finish line,” he says. “IPO-ready today means operating like a public company before you go public.”

That preparation comes down to three main pillars: financial discipline, governance infrastructure, and a compelling equity story.

“Financial discipline and strong fundamentals” are now essential, he says, meaning “a sustainable revenue model with clear unit economics and demonstrated profitability or a credible path to it.” He adds: “The days of speculative growth are over — it's now about business maturity, not just scale.”

Companies must also build robust governance structures before listing.

“This includes having independent board members, robust financial reporting systems, SOX-compliant internal controls, 2–3 years of audited financials, and the infrastructure to meet public company regulatory requirements from day one,” Trinchetto says.

And finally, the narrative around the business matters more than ever.

“A compelling equity story” requires “clear differentiation in your market, a defensible competitive moat, and a narrative that resonates with institutional investors who are now demanding proof, not just promises,” he says.

Timing the IPO window—or staying flexible

While IPO markets may appear to be reopening, sponsors still face difficult decisions about timing.

“Sponsors must balance exit strategy and timing with pressure to deliver to investors – and right now, that pressure is at an all-time high,” Trinchetto says. “The reality is that sometimes IPOs are less about favorable windows and more about necessity when exit pressure mounts.”

Because market conditions can shift quickly maintaining flexibility is key.

“There are several different paths to exit aside from IPOs, which is why we advise sponsors to take a dual-track approach: maintaining IPO readiness while exploring strategic alternatives,” he says. “This keeps optionality open if market conditions shift.”

Sponsors that focus on operational improvements rather than perfect timing may ultimately be better positioned.

“If your fundamentals are strong and you're truly ready, the decision becomes less about timing the market perfectly and more about executing when the opportunity presents itself,” Trinchetto says.

The internal weaknesses that derail deals

Even when market conditions cooperate, many IPO plans stall due to internal shortcomings—particularly around financial infrastructure.

“Financial reporting infrastructure can quickly derail deals because companies underestimate what PCAOB and SOX compliance actually demand,” Trinchetto says. “Most operate with lean finance teams and informal processes that work fine internally but fall apart under public company scrutiny.”

When those weaknesses surface late in the process, the consequences can be significant.

“When gaps surface — typically in technical accounting topics such as revenue recognition or accounting for prior equity raises, financial close, or internal controls — they damage investor confidence and push back timelines,” he says. “The reality is, building the necessary infrastructure takes 18–24 months, not six.”

Past acquisitions can also complicate the process.

“Recent acquisitions that are deemed significant could require their own stand-alone audits to be included in the filing — a requirement that is sometimes not considered until late in the process,” Trinchetto notes.

External shocks that could close the IPO window

Even well-prepared companies must contend with macro risks that can shut the IPO window quickly.

“Geopolitical conflict and tariff escalation pose the biggest overnight risks because they're harder to price and create immediate uncertainty,” Trinchetto says.

Unlike interest-rate policy, which tends to be telegraphed in advance, geopolitical developments can halt activity abruptly.

“Unlike Fed policy, which is signaled ahead of time and markets can digest gradually, geopolitical events hit suddenly,” he says. “We saw this last year with tariff announcements that froze IPO activity for weeks.”

The key, he adds, is preparation rather than prediction.

“The market underestimates how quickly these triggers can shift sentiment,” Trinchetto says. “Trade/tariff policy and geopolitical volatility could close the window quickly. Preparing for an exit matters more than trying to time around these risks.”

Competition raises the bar

Even if IPO markets reopen more fully, companies may face tougher competition for investor attention. With research firms projecting a sharp rise in PE-backed listings, Trinchetto expects quality to become an even bigger differentiator.

“With a wave of hundreds of unicorns lining up to go public, the bar is rising,” he says. “Only companies with differentiated models, exceptional metrics, and compelling narratives will stand out. The sponsors at greatest risk are holding companies that aren't quite there. They have thin margins, heavy debt loads, or businesses that aren't differentiated. Those assets will sit longer or exit at disappointing prices.”

Sponsors holding older portfolio companies may face similar challenges.

“Older, more mature companies are also at risk, as the upside in those investments is largely exhausted, making their post-IPO story less attractive,” Trinchetto concludes.