It's any entrepreneur's dream to start their own business, make it grow, and eventually take it to the business public. However, a public listing may not always be the natural development once the company has already grown to a certain profit level or size, nor is it the end all and be all. Preparing for an IPO or Initial Public Offering requires a total commitment on the entrepreneur's part as well as on the part of his management team.
These two parties need to look beyond the glamor and advantages. They should be fully aware of what it really means to be listed. Unfortunately, without enough knowledge and experience on the process, a person may find it very hard to understand what an Initial Public Offering or IPO really means. This is where an IPO consultant comes into play.
What is an IPO consultant in the first place? It's an individual or firm that assists companies in achieving or accomplishing their goals, from the exit strategy down to funding resources. A good consultant should have only one goal, and that is to make the process as easy and simple as possible.
An IPO consultant should be able to make an entrepreneur weigh the advantages and disadvantages of listing in the light of all the plans and goals of the company. A good consultant should be able to explain the following advantages to the entrepreneur:
Initial Public Offering is an alternative source of financing to bank borrowing
For most businesses, bank loans have always bee the traditional means of financing. However, an IPO provides a great alternative bank borrowing which generally requires a fixed repayment commitment including the interest.
Initial Public Offering is a ready market for the shares of the company
Investors can either buy or sell shares of a certain company listed in the stock exchange. Thus, the entrepreneur can reap the fruits of his labor simply by selling his shares in the market.
IPO provides the ability to perform merger and acquisition using the shares of the company as consideration
Because there is a ready market for the shares of the listed company, the company can use its shares to substitute cash as the payment for acquiring a potential target company.
IPO can enhance the status and image of the company
A listed company is often seen as stable, prestigious, and financially stable compared to a private company, having passed the careful examination and scrutiny of regulators working in the listing process.
A good consultant should not only talk about the advantages of Initial Public Offering, he should also be open about the drawbacks such as the following:
* More bureaucracy or less flexibility in making major decisions;
* Increased compliance cost;
* The risk of being taken over;
* Increased pressure for the short-term performance;
* Requires one to be committed to investor relationship management
Aside from discussing the different advantages and disadvantages of IPO, a consultant should be able to undertake the following areas of work:
The Initial Public Offering process can really be time-consuming and complex but with a clear overview of the overall listing process as well as the requisite commitment and of course, with the assistance of a GREAT consultant, the process may not be as complex and daunting as you thought.
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