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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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