Initial Public Offering

Initial Public Offering

An Initial Public Offering (IPO)is the first time that the 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 growth 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.

Important CaveatChoosing whether this transition alternative, or a mix of the other 7 alternatives on our website, is right for you really depends on your (and your shareholders) individual circumstances. This important decision requires careful analysis, before deciding which alternative strategy suits your circumstance the best. Smart transition decisions.