Should your company go public?
While seemingly a mark of arrival amongst many corporate and investment circles. The decision to move forward with a public offering should never be taken lightly. Going public can be wrought with challenges that and sometimes do outweigh the positive rewards associated with this process. Note, It is true that a public offering can provide companies seeking to maximize shareholder value the tools to quickly expand and increase the overall value of the company, but it is also true that there are numerous points that should be carefully analyzed prior to moving forward.
We understand why companies seek to go public; here are a few of those reasons:
1) Access to Capital: Becoming a public company provides the type of capital access that is rarely seen at the private level. While private equity and venture capital groups can provide a private company access to sizable sums of money; the public markets offer access to individual investors in huge numbers. This type of direct capital access allows for companies to raise funds faster and in greater quantities, which allows for those companies to put that capital to use in ways that simply don't exist in private forums.
2) Mergers and Acquisitions(M&A):Along with the ability raise funds faster and in greater volumes also comes the ability to spend that capital in greater volumes. The ability to use the resources made available by a public offering to expand vertically is a tried and true method upon which to increase shareholder volume. A public offering provides a company greater flexibility and credibility in the M&A process. Not only do these companies have the financial ability to become more active in the M&A markets, but the fact that the stock is traded publicly allows them the ability to offer alternative financing for these types of deals. The ability to include public stock and public debt as an instrument in the deal making process is a major advantage that public companies have over private companies. This is highly favorable during the due diligence process.
3) Minimized Dilution: Because of the added flexibility that public companies possess they are in a much better position to negate the massive dilution that comes along with private equity deals. With added demand for their shares they have several tools that are available to appease both existing shareholders and the new shareholders coming aboard.
4) Higher Valuation and Higher Liquidity: While private companies always have a challenge posting a consistent valuation due to the ambiguity of private markets, public companies are generally allowed a premium value based on their prestige and their status as a public entity. The fact that public shares are traded much more freely than private shares allows for increased liquidity both for the company and for the shareholders which in itself is a major driver of the value estimates given to public entities.
Along with the potential financial rewards of a public offering come increased pressure to meet benchmarks, limited controls for initial shareholders and founders, public disclosures, increased scrutiny from the IRS and the SEC, expensive filing fees, increased fees for legal and accounting advice, stringent reporting requirements, and hundreds (or more) new stakeholders who are very interested in how the business is being run. These challenges are very real, and an improper approach to dealing with these challenges can lead to catastrophic results.
Navigating the Offering process can be difficult, which is why Princeton Corporate Solutions provides its clients with a full scope of analytical and practical services which allows clients to gain confidence to either move forward with a public offering or decide to continue to exist as a private company. Through our analytical and due diligence processes we seek to breakdown the benefits of an offering and weigh them against the needs of the company and its ability to achieve success while meeting the many challenges of the public offering process. After our standard analytical process our clients can be confident with their decision of either going public or remaining private as they will have all possible information at their disposal. Providing this piece of mind to our clients is Princeton Corporate Solutions goal and why our clients are able to successfully navigate the public offering process.