Floating Your Company -

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Floating Your Company

2. Why Not?

2.1 Most companies cannot offer a return on investment sufficient to attract investors.

2.2 Another exit route - particularly a trade sale - may be a better alternative.

A trade sale is usually faster and cheaper than a flotation.
Some companies, particularly mature businesses in non-growth industries or those whose value is largely based on their assets, may realise a higher price through a trade sale.

2.3 You will have a responsibility to satisfy shareholders' interests, which may not always be in line with your own.

Shareholders may want you to focus on short-term profits, rather than your strategic goals.
Shareholders may want you to become involved in exciting ventures, rather than the opportunities you favour.
Some shareholders may expect generous, regular dividends, which could undermine cashflow.

2.4 You run the risk of losing control of the company altogether.

Substantial investors may want their own representatives appointed to the board.
If your (and other directors') shareholdings are diluted, it becomes easier for another business to make a takeover bid.

2.5 There are hidden costs as well as significant cash costs.

Managers can be distracted from running the business during the flotation.There will be a continuing time cost of dealing with investors afterwards.
If market conditions change, the float may have to be aborted.

2.6 Companies in which shares are traded have to comply with additional regulatory requirements.

You must publish full accounts twice a year, which will allow your competitors to see them.
You must meet accepted standards of corporate governance. For example, having independent non-executive directors.
You must ensure that important news is promptly communicated to all investors. For example, changes in your company structure.
You must invite all shareholders to an Annual General Meeting.

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