Initial Public Offering

Initial Public Offering

An Initial Public Offering (IPO) is the first time that shares in a private company are offered to the public.

IPOs are often issued by smaller, younger companies seeking capital to expand, but they can also be done by owners of larger privately-owned companies seeking an exit.

An Initial Public Offering (IPO) is not for every company, despite the hype that is often associated with this alternative.

Despite this, a small subset of mid-sized, privately-owned companies are excellent candidates for IPOs and pursuing this route can result in spectacular success for exiting owners.

Upsides

  • Inflated valuations over a private exit. This equity may be used to fund the exit of one or more existing shareholders.
  • More cash available to fund your optimisation program pre-transition.
  • Ongoing access to raise further capital to fuel growth.
  • Prestige of going public.

Downsides

  • Costs & risks associated with a failed IPO.
  • Short-term pressures for quarterly earnings.
  • Compliance & PR costs.
  • Liabilities for non-disclosure.
  • Culture change and other changes to your legacy – entrepreneurial vs. corporate.
  • Hostile takeover.
  • Lock-up periods where shareholders may not sell shares.

ImportantThe choice of transition strategy requires careful consideration of the consequences and trade-offs involved. We devote a lot of time with clients in choosing the smartest transition decision, that is aligned with individual circumstances.