by Jim Lee
http://www.magtin.com/
©
2008
There are many viable options when positioning a business
for growth. Expansion usually requires additional capital; one way to attract
interest from prospective investors and funding sources is to bring the company
public. Even start-up, early-stage and small businesses can effectively and inexpensively
go public via an Alternative Public Offering (APO). In many cases, an APO is more
attractive than either the venture capital or angel investment route. APOs are
also a cost effective means of going public when compared to a conventional IPO
or Reverse Merger (an Alternative Public Offering also eliminates the risks involved
with Reverse Mergers).
The advantages and benefits of being
a Public Company For Company Owners and Their Investors
Liquidity.
Bringing a company public provides liquidity for owners and investors. The
liquidity of privately held stock is not nearly as high as that of public equities.
The liquidity factor will improve the value to investors by allowing them to diversify
their portfolio and have a defined exit-strategy. Not only are there benefits
for owners and investors, but lenders will be more likely to issue credit to public
firms.
Employee Benefit.
Bringing a company public
can result in financial rewards and independence for not only the owners and investors,
but employees can benefit from becoming stockholders as well.
Estate
Planning.
If family members are counting on the owner to provide for them
in the future, the stock of a publicly traded company can be used as a part of
a retirement strategy. These assets will allow the family financial freedom after
the owner is out of the picture.
For the Company
Access
to Capital.
Taking a company public will provide potential investors with
confidence in the company, which will be translated into the ability to raise
money.
Mergers and Acquisitions.
If a component of
the growth strategy is to pursue a merger or acquisition, the ability to accomplish
these goals increases as a public entity. The stock that is sold in the company
will be equivalent to cash for the other company. If a merger or acquisition deal
is pursued using stock, the current market value of stock can be used to perform
the transaction.
Compensation for your Employees.
Attracting
and retaining key employees can be accomplished through allowing employees to
reap the same benefits as owners by becoming stockholders. This can also be a
factor in why these key people decide to stay with the company, especially if
the industry has a high turnover rate. This can make the difference in retaining
key employees.
Attract Executive Management.
Bringing
a company public will attract and retain high-level executives. While offering
stock in a private company is an option, publicly traded stock is usually more
valuable and desirable to your future and present executives.
Gives
your Employees the Incentive to Work Harder.
The liquidity of public stock
allows employees to reap greater rewards. They will feel as if they are an integral
part of the company with performance based income instead of just a paycheck.
By making employees part owners, the corporate drive is increased, making the
company the best it can be. The incentive to work harder makes the company stronger,
and in turn everyone is rewarded when the stock price rises. This incentive ties
an employees future and dedication with the success of the company.
Public
Companies are Generally Worth more than Privately Held Companies.
In many
cases, the increased value is quite substantial. A public company will almost
immediately see a stock value increase after going public.
Planning
& Management of the Process is Important to Success
It
is important for the company and business owner to understand that bringing a
company public, while even using a simple and cost-effective method such as an
Alternative Public Offering, can be a complex and confusing process, albeit manageable.
Here are the phases in the process that the company and IPO consultant need to
follow (and that have to be managed):
Pre-Public
Phase
One - Analyzing Clients Company in Preparation for Going Public
Phase Two
- Auditing Process and SEC Registration Using Form SB-2
Phase Three - Obtaining
the Stock Symbol and Being Listed on the OTC Bulletin Board
Post-Public
Phase
Four - Investment Bankers and Equity Credit Lines for New
Public Companies
Phase Five - Getting your Stock to Trade with Investor
Relations and Press
Releases
Phase Six - Growing with Acquisitions, Licensing, and Strategic
Relationships
Phase Seven - Upgrading to a Senior Exchange (NASDAQ or AMEX)
And
ultimately business owners should plan for:
Phase Eight
- Founders Exit Strategy (sale of your entire company or just your shares).
A
Good Team Is Crucial To Long-Term Success
Prior to going
public, it is essential to have a great team assembled to manage the process and
ensure that the company capably manages and executes the business plan for growth.
This team should consist of different professional resources from both inside
and outside the company, including lawyers familiar with the process and an IPO
consultant that can ease the process of bringing a company public. Make sure to
put the right people in the right positions to help your company reach its potential.
