Going public is becoming a popular trend among small businesses. This article will provide you with all the information that you need to know about going public, including what it means to go public, how to do it and the different structures available, and why so many companies are avoiding the traditional ‘investment banking’ approach and choosing an Agglomeration™ model or direct listing as their IPO strategy.
What Does It Mean To Go Public?
To start, what does going public mean? Going public is the process of becoming a publicly traded company. This means that shares in your business are available to be purchased by anyone and everyone, including people who live on other continents or even countries! They can buy shares through their broker or through their brokerage such as Interactive Brokers or Questrade.
Why Should You Consider It?
There are many benefits of being a public company, to name a few:
1) increased liquidity which provides the business with access to more capital
2) ability to expand quicker than competitors and increase market share
3) increase brand presence and win bigger / global contracts
and many more.
So if you can increase liquidity, scale and market share… why doesn’t every company go public?!
There are a few reasons, and we’ll cover them below.
How To Take A Small Business Public
There’s a common misconception that only businesses that reach a certain revenue, profit or market share size can go public. This is absolutely not true at all.
While public exchanges do require certain minimum requirements, there are other ways of becoming, or being part of, a publicly traded company and benefit from all the advantages that would offer.
The First Way Is Through An Agglomeration™
This model is becoming increasing popular for small business owners. An Agglomeration is a public-to-private transaction in which one company buys another and takes the smaller firm’s shares public as its own. It’s similar to a reverse-merger but with more advantages for the small business.
It’s the most effective solution for small businesses that want to achieve the benefits of going public without the lengthy process and tremendous costs, which most small businesses can not afford.
You get to participate within the group alongside other small businesses and benefit from a unique culture, governance structure and model that serves everyone holistically.
It’s best suited for small businesses that are owner-managed, are looking to grow and scale and are profitable. To see if you qualify for this, reach out to us and schedule an appointment with one of our small business M&A experts here.
The Second Way Is A Direct Listing
A direct listing provides entrepreneurs with a path to go through an IPO without raising money from outside investors or going through underwriting arrangements, such as with an investment bank.
Often, no new shares are created in this process and it allows you to have more control and does not involve the costs of hiring investment banks.
The opening stock price through a direct listing is completely subject to the market demand and volatility with market swings, including different rotations that happen across industries.
The Third Way Is An IPO Through A Banker
Most people are familiar with going public through a banker because it’s what most companies do if they choose to raise capital from outside investors or venture capitalists. This process has three major steps: – Preparing for Listing on an Exchange; – Underwriting by Investment Banks; and – Going Public With The Initial Public Offering.
Step One may be completed without hiring investment banks but after that bankers usually play a big role in managing the whole process including marketing it across their networks.
If you’re a small business owner and ready to take your business to the next level, contact us for more information to explore the different options available based on your unique situation.