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What are the Benefits of Going
Public? Answer: Most
companies think first of the benefit of access to capital, that it would
be easier to raise capital because once you become a public company, you
gain a benchmark trading/capital raising price, and an immediate exit
strategy for investors. There are a number of benefits
to be gained by becoming a public company and below we have listed the
key points. The Bull and Bear Group
can assist you through each and every stage of the process and most
importantly offer independent advice as to the best course of entry for
your company to the public market place.
There are many opportunities for you and your company
by becoming a public entity as well as many rewards. In order to reap
the maximum benefits much depends on the initial planning appropriate to
the needs of your company. The Bull and Bear
Group and its worldwide group of advisors can offer
independent advice as to the best course of entry for your company to
the public market place.
Expanded Benefit List:
-
Increased Valuation.
The United States Chamber of Commerce concluded in a recent study
that owners of private firms sell their companies at a valuation on
average 4 to 6 times their net earnings. However, public companies
were sold at an average of 25 times their net earnings. The
technology sector performed at even higher averages.
-
Liquidity.
Stock in a public company is much more liquid than stock in a
private company, this benefits founders and shareholders alike, as
well as a helping the company borrow more easily.
-
Access to Capital.
Most investment bankers and funds do not invest in private
companies, but they will invest in a public company, as an exit
strategy may play heavily into an investor’s decision to back your
company. A publicly traded company can go to the public markets for
capital via a stock or bond issue.
-
Mergers and
Acquisitions.
Public company stock can also be used for
expansion of your company through acquisitions and mergers. By using
stock, you will be able to utilize the current market value of your
stock as a substitute for cash when performing the transaction, thus
making it generally a substantially less expensive and easier
process.
-
Employee Attraction and
Retention.
Taking your company public can offer financial
rewards and independence for not only the owners and investors, but
also to the employees who can become stockholders and also by
offering stock options and estate planning for officers of your
public company. Publicly traded stock is usually more valuable and
desirable to your future executives.
-
Employee Compensation.
Public companies are more likely to attract highly qualified
employees by offering them stock in the company and will be a
deciding factor for your key employees to remain with you,
particularly if your industry has a high turnover rate.
-
Incentivize Employees to
Work Harder.
Employees definitely respond well when they
know they are a real part of your company. They become part of the
bigger picture in sharing your desire to make your company the best
it can be. The incentive to work harder and make the company prosper
is rewarded by the increase in the stock price and certainly ties in
your employee’s future with the success of their company.
-
Exit/Retirement Strategy
for Founders.
A most important benefit obtained by going
public is that a public market for their stock offers the founders a
long term exit strategy. This route is considerably more workable
and apt to result in much greater financial choice than an
equivalent private company.
-
Estate Planning.
Should you wish to provide financial independence for family members
in the future, the stock in your publicly traded company can be used
as a part of your strategy for retirement and estate planning.
-
Prestige and
Credibility.
Positive public perception of your company
is vital particularly regarding any type of expansion or capital
raising program. Typically, founders, co-founders and managers of
public companies are regarded as having a high level of prestige.
Going public gives your company and its founders greater visibility,
credibility, influence, and prestige with customers, employees, the
press, and the entire financial community. The prestige of your
company will also reflect on you as the founding owner.
-
Consumer Confidence.
Any company serving the needs of the general public is concerned
with consumer confidence and there is no doubt that by taking your
company public, you can convince these consumers that you mean
business. Your company’s reputation is solidified when you take this
step and will undoubtedly give you credence when dealing with
potential acquisitions, mergers, new employees and the community as
a whole.
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